Monday, May 2, 2011

Market Reaction after Osama bin Laden's death

Market Reaction after Osama bin Laden's death, oil prices forecast, gold prices, silver price, dollar reation, market ccommodities reaction : Osama bin Laden's death boosted the Australian share market in afternoon trade, but not enough to offset the effect of the strong local currency and a sharp fall in the silver futures price. At 1613 AEST, the benchmark S&P/ASX200 index was 2.1 points higher at 4825.3, while the broader All Ordinaries index was 2.8 points lower at 4896.2.

On the ASX 24, the June share price index futures contract was 19 points higher at 4827, with 40,258 contracts traded.

Osama bin Laden Dead: Stocks Higher, Oil and Gold Drop

Nearly 10 years after the 9-11 attacks, US forces killed Osama bin Laden, the mastermind of the largest the terrorist attacks in US history. Last night, President Obama said that “justice has been done,” after the leader of al Qaeda was killed in a firefight in Pakistan.

The market reaction was almost immediate: stocks and the US dollar higher, commodities lower. With a little bit of sleep, investors are likely to conclude that while this news is indeed a great shot in the arm of the national psyche, it should have little long-term impact on the economy and financial assets.

Let’s start with the numbers: European and Asian stock markets hit two-month highs, though volume was light due to holidays in UK, China, Hong Kong, Singapore, Malaysia and Thailand. Tokyo’s Nikkei average was up 1.6 percent and closed above the key 10,000 level for the first time since March 11 - the day of the devastating earthquake and tsunami.

US stock futures are up approximately 0.6 percent the US dollar is firming after a nine-day slide that left the greenback at the lowest level in three years. Commodities markets tumbled, with oil down over 2 percent and gold dropping 0.7 percent. The big loser was silver, which plunged as much as 13 percent and is currently off 6.5 percent, due to new exchange rules limiting speculative positions.

Why are markets moving at all? Osama bin Laden didn’t control a massive oil field and his death will not change corporate earnings, speed up economic growth, help the housing market or stop gas prices from rising. But investors are human beings, who are often guided by their emotions. Today we feel better - perhaps even optimistic - and as a result, we might feel a little more confident about putting our investment dollars at risk.

It doesn’t hurt that the news comes on the heels of a strong week and month for US stock indexes. The Dow Jones Industrial Average closed out its best monthly performance of the year, rising four percent to 12,810, and is now up 10.6 percent on the year. The S&P 500 gained 2.8 percent in April, up 8.4 percent year-to-date; and the NASDAQ added 3.3 percent on the month to 2873, up 8.3 percent on the year.

Before you jump on the stock bandwagon, I have to don my Certified Financial Planner hat and remind you that just like it’s not wise to make trades when markets drop; it’s equally dangerous to pile simply because they are rising. Knee-jerk reactions to important reactions can cost you big money — to prevent that from occurring, here’s what you should do:

* Open your statements
* Review where you stand
* Re-balance according to personal goals
* Beef-up cash for near-term funding (college tuition, car purchase)

If you work with a broker or an advisor:

* Schedule appointment to review progress
* Confirm how much service costs
* Review and update your plan
* Consider replacing managed funds with lower cost index or exchange-traded funds
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