Ignoring unrest will cost markets dear

published 29 May 2009

As with last year's Mumbai terrorist attacks and war in Georgia, markets remain concentrated on the next set of economic data, says John Foley on Breakingviews. Following North Korea's second nuclear test on Monday, Asian markets finished slightly higher, with South Korea's finishing flat after falling sharply earlier in the day.

Asian equities were down around 0.5% on Tuesday after North Korea fired two short-range missiles. But investors "should be wary of ignoring underlying geopolitical risks".

Markets are far too complacent, agrees Allister Heath in CityAM. North Korea's latest blast was far more powerful than its first and suggests Western containment has "completely failed".

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Meanwhile, Iran on Monday rejected calls to stop its nuclear work and ruled out talks. It has a missile with a range of 2,000km, which would put Israel and US Gulf bases within reach. "There is a real risk of real trouble" threatening the "liberal international trading order".

Yet "it feels just like the world economy in 2006", when most were confident that the credit markets were safe barring extreme events. We know how that turned out.

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