As Asia this morning absorbed the beginning of the long-expected war in Iraq, markets across the region traded higher on what many analysts read as expectations that the conflict will end quickly and decisively.
But analysts said the rallies offered no preview of the near-term future of the world's markets as war continues, because Asia has been lagging while Wall Street and Europe have enjoyed significant climbs in recent days, comforted by growing sentiment that the war will not drag on.
"Asia's not leading as far as being an indicator," said Timothy Moe, head of Asia-Pacific investment research at Goldman Sachs Group Inc. in Hong Kong. Today's buying mostly reflected investors' memories of the last Persian Gulf War in 1991, when stocks surged as the conflict began. "I think people are running that playbook as well," Moe said.
Tokyo's benchmark Nikkei average, which has hit a series of 20-year lows in recent sessions, was up nearly 2 percent in afternoon trading on the heels of a sharp rally on Wall Street on Wednesday. Indexes in South Korea, Hong Kong, Singapore, Taiwan, Australia and New Zealand were all up as well. The market in Shanghai was flat.
The momentum today appeared to provide the latest proof of an old economic truism: Markets abhor uncertainty. For weeks, traders have sold heavily around the world and in Asia as diplomatic jousting ran on at the United Nations. War is not good news, but -- for people who buy and sell stocks for a living -- it is at least a clear outcome.
"It is a bit perverse, but it's almost better to be at war than to be worrying about going to war," said Adrian Mowat, regional equities strategist at J.P. Morgan Chase & Co. in Hong Kong. "There's no uncertainty."
The market has shifted from prewar mode to war mode, said Kazunori Jinnai, a market analyst at Daiwa Securities SMBC in Tokyo. Now that the burden is lifted, he said, the market is rising on the notion that the war will be a quick one.
Mowat, however, did not buy the conventional wisdom. "If the market was expecting a quick war, then it would have been rallying before Bush's speech," he said, referring to the president's delivery on Monday of an ultimatum to Iraqi leader Saddam Hussein.
Rather, the market surge reflected more fundamental movements, Mowat said. After a period of decline, the dollar has been moving up in recent days against the euro and Japanese yen. That trend suggests improving economic prospects in the United States, traditionally the engine of global growth, while also making Japanese exports more price-competitive, pleasing Tokyo investors.
At the same time, the price of crude oil again dropped below $30 a barrel, after rising more than 30 percent over the past year, limiting fears that continued increases in the price of that critical commodity will add further drag to the world's economy.
"That's very good news," Mowat said.
Kashiwagi reported from Tokyo.