Shares have opened sharply down in early trade on the Australia Securities Exchange, with the benchmark ASX 200 index dropping 1.45 per cent.

Stock markets around the world are predicted to see similar falls in reaction to the Paris terror attacks on Friday.

A ‘flight to safety’ by anxious investors is a common response to terror attacks, usually followed by a reversion to pre-attack prices within days.

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Market Economics principal Stephen Koukoulas said he expected shares would recover quickly, but other factors weighing on the Australian market would complicated the picture.

“Sentiment is pretty sour,” he said.

“Investors are already watching for a Federal Reserve rate rise – and the Paris attacks are unlikely to have much bearing on that.

“There’s also the falling commodity prices story and the transition away from the mining boom. And the cooling of the housing market will be weighing on banks stocks.”

Mr Koukoulas said there was a “reasonable probability” the ASX 200 could finish the week below the 5000 mark.

At 10.30am, the market had dipped to 4980, but had recovered slightly to 4998.