Friday 15 December 2017

Shares rise across the globe thanks to 'Bin Laden bounce'

News of al-Qa'ida leader's death a big boost to market sentiment but analysts warn effect will likely be shortlived

An electronic stock board shows the closing price of the Nikkei outside a securities firm in Tokyo, Japan, yesterday
An electronic stock board shows the closing price of the Nikkei outside a securities firm in Tokyo, Japan, yesterday

Laura Noonan

THE 'Bin Laden bounce' was hailed by traders across the globe yesterday as stock markets across Europe, Asia and the US all rose strongly following news of the al-Qa'ida leader's death.

Osama bin Laden's demise also had an immediate impact on oil prices, which fell as much as 2.7pc in early trading, while the price of commodities, like silver and copper, fell as investors turned to equities.

Markets in the UK and Ireland were closed yesterday for the May bank holiday, but strong performances are expected today as the indexes are driven higher by the worldwide boost.

"Investors see Bin Laden's death as a very positive thing for sentiment for now and as a reason to buy," said Markus Huber, head of German sales trading at ETX Capital in London.

"Everyone is very positive at the moment as there is so much liquidity around."

The share rally was strongest in the US, as shares in the Dow Jones industrial average index rose 0.44pc in the first few minutes of trade while shares in the Nasdaq Composite rose 0.34pc.

By the close, the Dow had shed its gains while the Nasdaq was off 0.3pc.

The boost was more muted in Europe, with the FTSEurofirst 300 index closing up just 0.1pc, though this the highest close in two months and came amid sluggish trading.

In Asia, the Nikkei closed up 1.6pc, nudging the Tokyo-based index past the 10,000 mark for the first time since the devastating earthquake and tsunami on March 11.

But Christian Gattiker, head of research at Bank Julius Baer & Co, told Bloomberg TV that the Bin Laden boom could be "shortlived" as there were still "concerns weighing on the global economy".

His cautious tone was echoed by Jim O'Neill, chairman of Global Sachs Asset Management in London.

"The immediate consequences are, as we are seeing, a positive repricing of the US and its markets, and a slight de-rating of commodities," Mr O'Neill said.

"It might reduce some of the built-up equity risk premia that has been present since 2001.

"Beyond this immediate reaction, markets need to be careful as Bin Laden has possibly not been the single biggest security threat directly for many years, and those who will regard him as a martyr won't give up as a result of his killing."

The price of oil fell sharply in early trading as the dollar rose on the back of the successful Bin Laden operation, but later recovered strongly.

"Despite the initial market impact on oil prices, there's really no significant impact here on oil production or transit," said Ian Bremmer, the president and founder of political research firm Eurasia Group.

"Al-Qa'ida's prominence in Yemen and Saudi Arabia never meaningfully threatened Saudi oil production; so no change with Bin Laden's death."

The oil rebound dashed hopes of a meaningful fall in oil prices, which would have been good news for Irish stocks like Ryanair and Aer Lingus.

(Additional reporting, Bloomberg, Reuters)

Irish Independent

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