President Barack Obama’s announcement that the man who inspired the deadly Sept. 11, 2001, terror attacks in the United States had been killed in an operation by special forces in Pakistan, prompted an increase in investors’ appetite for risk. That usually benefits assets like stocks but dents widely-considered financial safe havens, such as gold.
“The immediate impact of Osama’s death has been a boost to risk appetite although the U.S. has also issued a travel alert because of ‘enhanced potential for anti-American violence,'” said Philip Marey, an analyst at Rabobank International.
However, due to holidays in Britain, China, Hong Kong, Malaysia, Singapore and Thailand, the reaction hasn’t been too substantial.
In Europe, the CAC-40 in France was 0.4 percent higher at 4,122 while Germany’s DAX rose 0.8 percent to 7,574, with airlines, such as Air France-KLM SA and Lufthansa AG, doing particularly well.
Wall Street was poised for a bright opening too later — Dow futures were up 0.7 percent at 12,842 while the broader Standard & Poor’s 500 futures rose 0.7 percent to 1,368.
Despite the knee-jerk response to news of bin Laden’s death, analysts said the markets will soon turn towards more fundamental matters for their direction, such as the state of the global economic recovery and how central banks respond to the threat of higher inflation.
Though bin Laden’s death may have a beneficial short-term impact on U.S. consumer confidence, Rabobank’s Marey said the main reasons for low confidence have not disappeared — unemployment is still high and so are gasoline prices
The coming week is awash with key economic developments that could have a huge bearing on all types of markets in the run-up to summer.
In the U.S., a run of economic data, which begins later with the monthly manufacturing survey from the Institute for Supply Management, culminates on Friday with the April nonfarm payrolls data from the U.S. government. That often sets the tone in markets for a week or two after their release.
In Europe, investors will be keeping a close watch on interest rate decisions from the European Central Bank and the Bank of England. Neither is expected to change interest rates though the ECB is tipped to indicate that it will follow up April’s first interest rate increase in nearly three years with another rise in June.
Figures earlier reinforced market expectations that the ECB will sound a hawkish tone on Thursday.
The monthly manufacturing purchasing managers’ index — a broad gauge of activity — for the 17 countries that use the euro was revised up to 58 in April from the initial estimate of 57.7 — April’s reading indicated that the sector was enjoying its second-strongest monthly pace of expansion since August 2000.
“The survey reinforces belief that the ECB will pull the interest rate trigger sooner rather than later,” said Howard Archer, chief European economist at IHS Global Insight.
That belief has helped bolster the euro currency over the past couple of months despite ongoing debt problems across the eurozone, most notably in Greece, Ireland and Portugal.
It has also helped shore up the currency against the dollar Monday, even though the U.S. currency has been supported elsewhere by the news of bin Laden’s death.
By mid morning London time, the euro was 0.2 percent higher at $1.4827 while the dollar was 0.4 percent firmer at 81.55 yen.
Elsewhere, oil prices eased off 2½-year highs to below $113 a barrel. Benchmark crude for June delivery was down $1.40 at $112.53 a barrel in electronic trading on the New York Mercantile Exchange.
Meanwhile, an ounce of gold was down 0.3 percent at $1,551, down from an earlier record of just above $1,575 an ounce.