The assassination of Pakistani opposition leader and former prime minister Benazir Bhutto sparked fear of global unrest. Her murder further highlights the issue of terrorism. Such gloomy scenario had trickled down to the financial markets and triggered a classical flight-to-safety asset flows.
On Dec. 27, the day of the assassination, the Dow Jones Industrial Average (DJIA) sank 192.08 points, or 1.42%, to close at 13,359.61 points. The S&P-500 slid 21.39 points, or 1.43%, to 1,476.27 points, while the Nasdaq tumbled 47.62 points, or 1.75%, to 2,676.79 points.
Meanwhile, the price of gold hit a one-month peak as traders reacted to the event. The precious metal, widely regarded as a safe investment in times of geopolitical uncertainty, climbed to US$830.41 per ounce from about US$825 dollars per ounce on the London Bullion Market before news of Bhutto's death.
Consequently, the Swiss franc, the currency which has a direct correlation to gold, had ended higher against both the US dollar and the euro. Coupled with weak economic data released at the same time as Bhutto's death, the greenback declined heavily by 0.6% at CHF1.1428 level. On the other hand, the euro fell to CHF1.6665, or about 0.16% lower than its level before the tragic incident took place.
In the bond market, the 10-year US treasury notes, which prices had already been up on the day after weaker-than-expected US economic data, had spiked on the news, but soon gave back some of the gains. It was up 19/32 at 4.21%.
It was indeed a volatile situation out there, but the markets are not yet panicking. Most traders' behavior was just a normal knee-jerk reaction to an unexpected event.
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