World Market Overview Report 16/03/2011
U.S. Markets
U.S. stocks sank Tuesday as worries deepened over the specter of a nuclear crisis and economic slowdown in Japan, but encouraging comments from the Federal Reserve kept the losses in check.
[Get this delivered to your inbox for FREE. Subscribe to our daily Markets Newsletter.]
The Dow Jones Industrial Average fell 137.74 points, or 1.15%, to 11855.42. The Standard & Poor's 500-stock index slid 14.52, or 1.12%, to 1281.87, with all of its sectors in the red. The Nasdaq Composite fell 33.64, or 1.25%, to 2667.33, its lowest close of the year.
U.S. benchmark indexes plunged early Tuesday, following steep losses in Asian and European markets after Japan's prime minister warned of substantial radiation leaks at a damaged nuclear-power plant in the wake of last week's earthquake. It took only five minutes for the Dow to tumble 297 points Tuesday, hitting its lowest point of the session and suffering its biggest intraday drop of the year. The measure had not tumbled so far so quickly since the heart of the economic recession, when, on Oct. 24, 2008, the measure plunged 504 points in the first five minutes of trading.
Stocks later halved the session's steep losses after the U.S. central bank voted unanimously to keep in place its government-bond purchase plan and to maintain a pledge that short-term interest rates will stay close to zero for an "extended period." In a statement following its policy meeting, the central bank noted improvements in consumer spending and a brighter jobs picture. Fed officials also said the strong rise in international commodity prices was putting upward pressure on prices, though they expected the effects of higher oil prices to be transitory. Still, the immediate impact of the earthquake's destruction and the enfolding nuclear crisis weighed heavily on industrial and technology stocks, which could see demand slacken.
Shares of General Electric fell 31 cents, or 1.6%, to $19.61, due to concerns about the company's involvement in the design of reactors at the Fukushima Daiichi nuclear plant in Japan. Technology stocks were also weak. Intel tumbled 66 cents, or 3.2%, to 20.18, while Cisco Systems sank 46 cents, or 2.6%, to 17.39. Insurers were under pressure as concerns grew about the rising costs in Japan. Aflac fell 3.01, or 5.6%, to 50.89, Hartford Financial shed 1.22, or 4.6%, to 25.60, MetLife dropped 1.34, or 3%, to 43.40, and Prudential Financial declined 1.17, or 1.9%, to 60.09.
European markets
European stock markets fell sharply Tuesday, joining a global selloff as worries escalated over the situation at a nuclear-power plant in Japan following last week's disastrous earthquake. The Stoxx Europe 600 index closed down 2.3% at 266.3, after losing 1.1% Monday. Among the top decliners were miner Fresnillo PLC, which lost 4.4%, and airline Deutsche Lufthansa AG, down 5.9%. The plunge came after a third explosion rocked the Fukushima Daiichi nuclear plant. Prime Minister Naoto Kan warned of "substantial" radiation leaks and ordered the evacuation of the area around the plant.
[Get this delivered to your inbox for FREE. Subscribe to our daily Markets Newsletter.]
In Germany, the government said it will shut seven of the nation's oldest nuclear plants for three months as part of a review of plant safety. Utility firms with investments in nuclear energy fell for a second day: E.On AG lost 2.8% and RWE AG closed down 3.6%. Automakers also fell. Shares of Daimler AG dipped 4%, Volkswagen AG slumped 3.8%, and BMW AG slipped 2.7%.
The German DAX 30 index was the biggest decliner among top regional indices, losing 3.2% to 6,647.7. Matters were not helped by a German ZEW economic sentiment index released earlier, which showed the index declined to 14.1 points in March from 15.7 in February. In Paris, nuclear engineering group Areva SA tumbled nearly 9%, extending Monday's sharp losses. The top decliner on the French CAC 40 index, which finished down 2.5% at 3,780.8, was PPR SA, a multinational holding company specializing in luxury goods. The stock fell 5.3%.
Britain's top share index fell to its lowest closing level in 15 weeks on Tuesday as fears about a nuclear catastrophe in Japan prompted investors to shun risky assets. The FTSE ended down for a fifth consecutive session, off 79.96 points, or 1.4 percent, at 5,695.28, wiping nearly 21 billion pounds ($33.86 billion) off the market. The index has declined almost 5 percent in March.
Miners bore the brunt of the sell-off, though traders did see upside for the sector longer-term given its lacklustre start to the year and the need for Japan to rebuild. London-listed uranium explorer Kalahari Minerals shed 11.6 percent on concerns over the future of the global nuclear power plant construction programme after the events in Japan.Luxury goods' companies were among other major fallers as Japan is one of their major markets.
Burberry fell 1.2 percent, as investors sold the stock on concerns over Japanese demand for its goods. ARM Holdings lost 1.5 percent as the chip designer suffered from disruption to production as a result of the Japan quake.
Asia markets
Asian shares tumbled Tuesday as Tokyo's stock benchmark plunged 11% on panic selling amid worries that a possible nuclear catastrophe in Japan would further complicate and endanger the nation's recovery from its worst earthquake on record. The Nikkei Stock Average finished 11% lower at 8,605.15 after sliding more than 14% earlier in the day, pressured by news of explosions at Tokyo Electric Power Co.'s Fukushima Daiichi nuclear power plant's No. 2 and No. 4 reactors, on top of previous blasts at the Nos. 1 and 3 reactors. Coming on top of a 6.2% fall Monday, the performance is the Nikkei's worst since its Oct. 16, 2008, drop of 11.4%, in the aftermath of the global financial crisis. Investor wealth of $364 billion--9.4% of the Tokyo stock exchange's market capitalization--was wiped out during the session after Japanese Prime Minister Naoto Kan said there is a high risk of elevated radiation levels from the nuclear reactors and urged people within 30 kilometers of the plant to stay indoors. The Tokyo metropolitan government said radiation levels in the capital surged to 23 times the normal level Tuesday.
Ranking among the major losers in Tokyo, shares of Tokyo Electric Power Co. dropped 25%, Toshiba Corp. fell 20% and Fast Retailing Co. shed 18%. The hefty losses in Tokyo also drove declines in other Asian markets, raising concerns about a wider global market fallout. Hong Kong's Hang Seng Index tumbled 2.9%, China's Shanghai Composite lost 1.4%, Taiwan's Taiex skidded 3.4% and South Korea's Kospi gave up 2.4%, while India's Sensex fell 1.5%. Figuring among the major stock movers in the region were Chinese coal and gold miners, which retreated, tracking a fall in global oil and gold prices. China Shenhua Energy Co. dropped 2.7% and Zijin Mining Group Co. lost 3.8% in Shanghai; in Hong Kong, they gave up 2% and 3.4%, respectively. Shares of Ping An Insurance Group Co. of China sank 6.1% in Hong Kong on the insurer's plan to raise $2.5 billion from a private placement.
Base Metals
Base metals closed lower on the London Metal Exchange Tuesday, although many of the markets pared their losses during afternoon trade in Europe as the greenback softened and cautious investors awaited the outcome of a key monetary-policy meeting in the U.S. The metals had plunged sharply in early trade amid a bearish turn in sentiment, with the exchange's flagship copper contract having falling to its lowest level since mid-December.
The metals tumbled amid a broad-based slump in commodities as growing fears of a nuclear crisis in Japan--following Friday's earthquake and tsunami--battered global stock markets. LME three-month copper closed the day at $9,118 a metric ton, down 0.7% on the day, but up significantly from an intraday low of $8,944.50/ton. Three-month tin and three-month nickel were the largest losers of the day, closing down 4.4% and 4.3% respectively.
Crude Fututes
Crude futures posted the largest one-day drop in nearly five months Tuesday as Japan's earthquake and ensuing nuclear crisis threatened to disrupt the economy of the world's third-largest oil consumer. Light, sweet crude for April delivery settled $4.01, or 4%, lower at $97.18 a barrel on the New York Mercantile Exchange, the largest one-day percentage drop since October and lowest settlement in two weeks.
Brent crude on the ICE futures exchange fell $5.08 to $108.59 a barrel. Japanese crews scrambled Tuesday to prevent reactor meltdowns at the earthquake-damaged Fukushima Daiichi nuclear plant, appearing to regain partial control of damaged reactors even as worrying signs emerged in previously unaffected areas.
The nuclear crisis and its potential to delay already strained recovery efforts in the country pressured oil prices even as tensions escalated in the Middle East. Gold prices settled near a one-month low as investors moved to cash amid fears of a nuclear disaster in Japan. The most actively traded contract, for April delivery, settled down 2.3%, or $32.10, at $1,392.80 a troy ounce on the Comex division of the New York Mercantile Exchange. The thinly traded March delivery contract was down 2.3%, or $32.00, at $1,392.60 a troy ounce.
More from IBT Markets:
Newsletter: To receive Global Markets update, sign up here