The City of London operates on fear and greed. Today, fear took the lead. The life sentence handed down to the perpetrator of the Berlin Christmas market massacre sends a strong signal, but in the markets, sentiment is the only currency that matters.
The 2016 attack that killed 12 and injured 56 was a chilling reminder that soft targets remain vulnerable. Now, as the festive season approaches, UK officials are scrambling to reassess security protocols. This is not about sentimentality about mulled wine or mince pies.
This is about the cost of risk. The insurance premiums for public events will rise. So will the implicit cost of security.
Every pound spent on barriers and surveillance is a pound not spent on growth. The market abhors uncertainty. The review of festive security will inevitably lead to a harder, more visible presence at Christmas markets.
But will it change the behaviour of consumers? In the short term, perhaps not. The London Eye and the Christmas markets in Hyde Park will likely see normal footfall.
But if another attack occurs, the economic damage could be severe. The gilt market, however, remains sanguine. Gilt yields are steady at around 4.
2% today. The Bank of England continues to walk a tightrope between inflation and growth. A major security incident could tip the balance.
The cost of capital flight from the pound? Unlikely in the immediate term, but the market watches the peripheries. The German justice system has done its job.
Now the UK must ensure its own house is in order. The fiscal responsibility of securing public spaces falls squarely on the government. If they overspend on security without a clear return on investment, the bond market will punish them.
Investors do not care about carols. They care about stability. The next few weeks will test that stability.
The City will be watching. The bottom line? Security is an investment.
Let us hope the dividend is peace.
