How the Death of Bin Laden Will Move Markets

Last night’s revelation that Osama bin Laden had finally been killed was met by jubilation across America. And people aren’t the only celebrants – as markets begin to open for Monday trading, stocks and commodities are preparing to join the party.

Stocks

As of 8:45 a.m. EST, futures are indicating the Dow will open about 72 points higher, or .5 percent. Stock markets in Europe – already open – are trading flat (Britain) to .8 percent higher (Germany).

You can track world markets at this page of MSN Money.

By way of comparison, on the first trading day after September 11, 2001, the Dow fell 685 points, or 7.3 percent, to 8,921.

Commodities

Gold is often used by investors to hedge against global political uncertainty. In the immediate aftermath of Bin Laden’s death, prices dropped. However, as the realization that terrorist reprisals may result, prices went higher. And as of 8:45 a.m., gold is basically unchanged.

Bin Laden’s death should also have a positive effect on oil prices, since so much of the world’s oil comes from the Middle East, and the more politically stable the region, the better. In pre-opening electronic trading, oil prices retreated $1.48 with June futures trading at $112.45/barrel.

To track what’s happening with everything from oil to corn prices, see this page of MSN Money.

What’s next?

The effects of Bin Laden’s death could have a profound effect on world markets, either positive or negative. If his death breaks the back of his worldwide terrorist network, the results would obviously be positive and show up as higher stock prices and potentially lower prices for oil, gold, and other commodities. On the other hand, if the response from Al-Qaeda is a major campaign of violent reprisals, the opposite would occur – lower stock prices and higher gold and commodities prices.

What most experts – and the markets – seem to be predicting at this point, however, is that neither of these extremes will occur. Al-Qaeda won’t give up and go home, nor are they likely to increase disruptive attacks in the wake of bin Laden’s death.

Bottom line? Terror networks like Osama bin Laden’s have a huge influence on the world of money. They create a “risk premium” in commodities that drive some prices higher. They create profit uncertainty that pushes some stock prices lower. And most important, they cause countries like the United States to divert massive amounts of money into fighting terrorism that could be more effectively deployed elsewhere.

Watching markets can tell you whether traders view bin Laden’s death as good, bad, or indifferent for the world economy. In the early hours of the morning after his death, muted market responses are signaling that not much has changed. Let’s hope they’re wrong.

But even if markets don’t view the death of bin Laden as significant economically, the American people and our allies around the world certainly view it as extremely positive psychologically. For now, that’s good enough.

To see the how 20 different newspapers reported bin Laden’s death on front pages, see this story from the Poynter Institute.

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