Investors' appetite for risk showed some signs of returning Monday, in relatively muted reaction to the announcement that the face of al Qaeda, Osama bin Laden, has been killed in a shootout with U.S. special forces in Pakistan.
World stock markets were up slightly, the U.S. dollar rose and the price of oil was down briefly as trading opened Monday, in the hours following U.S. President Barack Obama's late-night announcement that the world's most-wanted terrorist was killed in a U.S.-led operation.
Across Asia, where trading is thin amid a week of holidays throughout the region, Japan's Nikkei 225 was up 1.6 per cent to its highest closing since the country's devastating earthquake and tsunami on March 11. And in Seoul, South Korea's Kospi index rose 1.7 per cent to close at a new record high.
Stock markets in Hong Kong, Shanghai, Taiwan, Thailand, Malaysia and Singapore are all closed for international Labour Day Monday, as is Britain's FTSE 100.
Elsewhere in Europe, however, markets in France and Germany were trading 0.3 per cent and 0.5 per cent higher respectively, while America's Dow Jones industrial average was up 0.3 per cent.
Watching market reaction from Toronto, BNN's Michael Kane says the bounce is to be expected, but may prove short-lived as investors return their focus to market fundamentals.
"The knee-jerk reaction is that the terror threat to American interests is perceived to be lower now, and as a result people are buying into the U.S. dollar, they will buy into U.S. stocks," Kane told CTV's Canada AM.
Noting that the U.S. State Department has warned Americans to be on the lookout for reprisal attacks, however, Kane added that, "the uncertainty created by this situation could send the stock markets for a spin."
The question is whether Osama's demise will mean a weakening of al Qaeda and its efforts to destabilize the oil-rich Middle East, or give rise to wave of reprisal attacks.
"It's going to be one of those wait-and-see type days," Kane said.
In the meantime, traders appear to be banking on the world now being a safer place.
That means investors are moving money from so-called safe havens and into riskier investments.
That's seen the price of gold and silver drop, and the price for a barrel of oil briefly dip below its two-and-a-half year highs.
Responding to the strength of the U.S. greenback, the price of benchmark crude for June delivery dropped below US$113 in electronic trading on the New York Mercantile Exchange.
And it's even had an effect on the loonie.
"Oddly, U.S. dollar strength does not mean Canadian dollar weakness, at least on this occasion," Kane explained.
"This perceived lowering of the threat of terrorism means investors have more of an appetite for risk, and the Canadian dollar is still regarded as a risk play."
But, as a senior market analyst at Interactive Brokers told The Associated Press, the influence of the global economic recovery and how central banks respond to rising inflation should soon overtake this post-bin Laden bounce.
"It seems fanciful to accept that global equity markets had been restrained for a decade for fear that Osama bin Laden might pull off another terror attack somewhere around the globe," Andrew Wilkinson told the AP.
"The world economy has lived through two recessions since 9/11."
A stream of new U.S. economic data is expected this week, starting with the monthly manufacturing survey on Monday, and culminating with the nonfarm payrolls data on Friday.
Investors in Europe, meanwhile, are on the lookout for key interest rate decisions from the European Central Bank and the bank of England.
Oil prices that had dipped below US$111 a barrel in trading on the New york Mercantile Exchange Monday morning are on the rise again as the retreating U.S. dollar makes crude more attractive to buyers with foreign currency.
"Right now, partly out of deficit concerns and continuing unrest in Libya and Syria, there's still some demand for safe havens, including commodities," the president of Strategic Energy & Economic Research Michael Lynch told AP.
With files from The Associated Press
