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Japan quake rocks markets Sensex feels tsunami impact

March 11: Japan’s massive earthquake and deadly tsunami pounded commodity and equity markets worldwide on Friday, while the yen rose on expectations that Tokyo will need to repatriate funds to pay for repairs.

Oil prices slid more than $3 a barrel as investors grappled with the potential economic impact after Japan’s biggest earthquake on record hit the country’s northeast.

US crude dipped below $100, before paring some losses. Japan is the world’s third largest economy and also the world’s third-largest energy consumer; it imports almost all its energy needs.

While MSCI’s all-country world index of global stocks fell to a five-week low, the Nikkei 225 index in Japan slid 1.7 per cent. The Bombay Stock Exchange sensex lost 154 points, or 0.84 per cent, to 18174.09 points.

“We need to think what the potential impact on Japanese economy from the quake will be and what the impact on the global economy will be,” said Olivier Jakob, with Petromatrix. “That may weigh on oil demand from Japan and the oil price.”

Japanese equity futures fell 3.3 per cent, but market players said shares might not suffer too deep a slide because major cities and manufacturing facilities were not damaged by the 8.9 magnitude quake and 10-metre tsuanami, which killed hundreds.

Copper extended its fall on news of the quake and as Chinese inflation data fuelled concerns over demand from the top consumer of the metal.

Chinese inflation in February topped expectations at 4.9 per cent and looked set to climb further in the coming months, adding to pressure for another dose of monetary tightening.

“The earthquake is clearly risk-negative, and you have seen continuation of selling that has been going on all week. But there are plenty of other things to make the world unhappy,” said Nick Moore, RBS global head of commodity and strategy.

North Sea Brent fell $1.53 to $113.90, while US light sweet crude was off $2.03 at $100.67.

European shares fell to a 2011 closing low, with insurers among the hardest hit, but US stocks edged higher as US commerce department data pointed to strong consumer spending and accelerated growth in the first quarter.

US retail sales rose 1 per cent in February, the largest gain in four months, as shoppers stepped up purchases of autos, clothes and other goods even as they spent more for gasoline.

The Dow Jones Idustrial Average was up 19.22 points, or 0.16 per cent, at 12003.80. The Standard & Poor’s 500 Index was up 5.22 points, or 0.40 per cent, at 1300.33. The Nasdaq Composite Index was up 6.62 points, or 0.25 per cent, at 2707.64.

The yen gained against the dollar and the euro, buoyed by expectations of repatriated funds flowing in to pay for damages caused by the quake and tsunami.

The yen recovered after an initial knee-jerk reaction to sell the currency drove it to a two-week low against the dollar. Analysts said the yen could stay choppy on near-term worries about the impact on a shaky Japanese economy.

Gold slipped but was supported by the safe-haven buying on the earthquake and investor concerns over unrest in west Asia.

US treasury debt prices dropped on fears that Japanese insurers may need to sell bonds to pay for damages.

Local effect

The sensex today fell 154 points over investor concerns over the health of the global economy in the wake of the natural disaster in Japan.

Passing through a rough patch on account of rising unrest in West Asia, the sensex today ended at 18174.09 after opening at 18248.11 and hitting an intra-day low of 18063.29.

An analyst said that the tragedy in Japan might impact India’s auto components industry.

Eleven of the 13 sectoral indices fell with the BSE metal losing the most. The metal index closed lower by 1.91 per cent, the tech index by 1.61 per cent and the BSE-IT index by 1.49 per cent. Close to 25 out of 30 index-based scrips declined, while others gained.

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