Even nuclear North Korea fails to deter investors
Hard to imagine that financial markets could be blase about a member of U.S. President George W. Bush's "axis of evil" setting off a nuclear device.
A day after North Korea said it had conducted a nuclear test, however, and that is just how it appeared. Equity markets from Tokyo to London were climbing ahead at various highs and safe haven bonds were out of favour.
About the only market reaction to Pyongyang's test which otherwise unleashed a torrent of diplomatic fury was in the region itself on Monday, the day of the test.
Others more or less ignored the event. By Tuesday, even South Korea's bourse and won currency were gaining.
What does this say about the current state of global markets and the mindset of the investors who drive them?
At one level, it says that they have become inured to event shocks, realising that they do not necessarily reshape the investment landscape. As one investor put it, even September 11, 2001, failed to trigger economic disaster.
"People have simply learnt to live with geopolitical risk," said Michala Marcussen, director of strategy and economic research at Societe Generale Asset Management.
But equally the ability of markets to look past events such as a nuclear test in what many in the West consider a rogue state rests on a belief that the fundamentals of the global economy are able to overcome it from an investment stance.
"It just seems as if the market is very comforted by the fact that the economic situation remains fairly healthy," Marcussen said. "There are many things out there that have reassured the market."
PLAIN SAILING
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