News that Osama bin Laden has been killed in a US operation had an immediate impact on markets around the world - with video.
Global markets react to Osama bin Laden killing
The MSCI Asia Pacific Index gained 0.7 per cent to 140.42 at 7:38 p.m. in Tokyo, the highest level since January 19. Three stocks rose for each that fell on the gauge. The measure rose 0.5 per cent last week after the Federal Reserve renewed its pledge to stimulate growth in the U.S., the world's biggest economy, with low interest rates.
"The death of bin Laden eases some concern, but it's hard to imagine it'll lead to a reduction of risk in the Middle East, and so the market's reaction may be transitory," said Koichiro Nishio, a market analyst in Tokyo at SMBC Nikko Securities Inc. "The recovery of demand in the U.S. and other developed countries means a better environment for earnings."
Japan's Nikkei 225 Stock Average rose 1.6 per cent to the highest level since the March 11 earthquake and tsunami. Japanese shares extended gains when the dollar strengthened versus the yen after President Obama said bin Laden was killed yesterday in a firefight with a team of US operatives who raided a compound in Pakistan where he had been hiding.
Pakistan's Karachi Stock Exchange 100 Index slipped 0.2 per cent. Futures on the US Standard & Poor's 500 Index advanced 0.3 per cent today. The stock gauge rose 0.2 per cent to 1,363.61 on April 29.
South Korea's Kospi Index added 1.7 per cent. Australia's S&P/ASX 200 Index was little changed, recovering from a loss of as much as 1.2 per cent after the nation's currency rose above $1.10 for the first time since foreign-exchange controls were scrapped in 1983. Australia's manufacturing contracted in April for the seventh time in eight months as the record-high currency and consumer caution hurt textile and other producers, an industry report showed today.
The news appeared to have provided a reason for investors to unwind extended positions in many assets, including very short dollar positions in holiday-thinned Asian trade.
Earlier, investors had a taste of how vulnerable overbought assets can be to a sudden sell-off when silver dropped 10 per cent after hitting a record high last week and the Australian dollar slumped nearly a full cent after reaching a post-float peak of $1.1011.
The so-called Aussie and the New Zealand dollar - the kiwi - dropped as the announcement pushed up US stock futures, boosting the allure of assets in the world's largest economy. Australia's currency also declined as the central bank is forecast to keep its benchmark interest rate at 4.75 per cent tomorrow, according to 21 of 22 economists surveyed by Bloomberg News.
"This is good news for the US, and that means the dollar gets bought," said Kuniyuki Hirai, manager of foreign-exchange trading at Bank of Tokyo-Mitsubishi, a unit of Japan's largest lender. "This may reduce the burden of US military expenses and prove that Obama's operation was right."
"It should buoy confidence, help risk assets and probably hurt Treasuries," said Gavin Stacey, an interest-rate strategist in Sydney at Barclays Plc. "In an economy which is recovering, anything that buoys confidence is a positive."