Japan Earthquake Causes Heavy Fall in Markets

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Financial Markets
Financial Markets

Most of the markets have fallen in response to a tsunami and earthquake in Japan measuring 8.9 on the Richter scale, which struck only minutes before the 0645 GMT close of trading in Tokyo. The Nikkei index ended the day some 1.7% lower, but Nikkei futures fell 3% in after-hours trading in Singapore as the scale of damage became apparent.

European markets opened with heavy losses, tracking a slide in US stock futures, after a severe earthquake and tsunami hit Japan.

The worst of the early decline has been pared, but the FTSE Eurofirst is still down 0.5 per cent, as the insurance sector loses 2 per cent. London’s FTSE 100 has shed 0.2 per cent, with energy groups doing a big chunk of the damage. The Dax Volatility index is up 4 per cent to a 3½ month high of 22.3.

The yen quickly fell after the earthquake struck, but has since recouped its losses as its haven status outweighs economic concerns. Another driver for the yen may be the belief that domestic investors will repatriate yen at times of crisis. The Japanese unit is up 0.2 per cent versus the dollar to Y82.81. The dollar index is off 0.2 per cent to 77.14 as the buck loses 0.3 per cent versus the euro, to $1.3833.

Hong Kong’s Hang Seng dropped some 1.8% following the earthquake, and ended the day down 1.6%. The Shanghai composite fell only 0.8%.

Insurance stocks were hit worldwide in anticipation of big payouts to cover the cost of the disaster.

Brent crude is down 2.5 per cent to $112.87 a barrel as traders reckon demand from Japan may be hit. Haven inflows have pushed US benchmark Treasury yields down 2 basis points to 3.35 per cent and forced gold up 0.3 per cent to $1,417 an ounce.

Many commodities have also been on a tear, hitting fresh records. But these too have been signalling tougher times. Traders have been particularly exercised by copper’s fall of more than 10 per cent over the past week or so.

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