Selling on Syria likely short-lived, going by history
If the reaction of equity markets to past U.S. intervention in the Middle East is anything to go by, any further selling in stocks ahead of a possible military strike against Syria could be short-lived.
According to Shane Oliver, head of investment strategy and chief economist at AMP Capital in Sydney, U.S. stock markets fell ahead of U.S. military intervention in Iraq in 1991, 1998 and 2003, and ahead of intervention in Libya in 2011. But they retraced all those losses within two months of the actual events.
So what's the implication for trade in markets today, as the U.S. looks poised to launch a missile strike against Syria for the suspected use of chemical weapons against civilians?
"Basically, shares could still fall a bit ahead of any strikes but once they [strikes] commence, stocks are likely to rally, particularly if it appears likely that any western military action will be limited," Oliver said.
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"Providing there is no retaliation by Syria or Iran in some way, which appears unlikely, this should further reinforce any recovery. Of course markets will then start to refocus on other threats such as taper talk from the Fed [Federal Reserve] and coming government funding and debt ceiling negotiations in the U.S.," he added, referring to other factors cited as risks to global markets in the weeks ahead.
Falls in US stocks ahead of US military intervention:
The S&P 500, a broad measure of U.S. stock market performance, has tumbled about 1.6 percent this week, while equity markets around the world have fallen amid jitters related to Syria.
Still, Wall Street shares closed broadly higher on Wednesday, boosted by gains in the energy sector.
According to some analysts, attention was already moving away from Syria.
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"The possibility of a military strike on Syria has not diminished over the past 24 hours but you would not be able to tell that from today's [Wednesday] price action in the financial markets. U.S. stocks rebounded, Treasury yields edged higher and currencies recovered," Kathy Lien, a managing director at BK Asset Management in New York, said in a research note.
She added that the overnight moves in global market reflect a perception by some investors that tensions in Syria pose a short-term – not long-term – risk for markets.
"As the world decides if and when it wants to deepen its involvement in Syria, investors may shift their attention to U.S. data and the prospect of Fed tapering," Lien added.
— By CNBC.Com's Dhara Ranasinghe; follow her on Twitter