European and Asian equities slid and the safe-haven yen rose in volatile trade yesterday after a huge earthquake in Japan, the world’s third-largest economy, as dealers also tracked a eurozone summit and unrest in the Arab world.
At least 300 people were killed in the massive 8.9-magnitude earthquake that hit Japan, unleashing huge tsunamis along its Pacific coast, according to police and press reports.
“A perfect storm batters markets,” said analyst Kathleen Brooks at trading site Forex.com.
“Three factors are weighing on market sentiment today: the Japanese earthquake, Spain’s sovereign debt downgrade yesterday (and) continuing problems in the Middle East and the threat this poses to oil supplies.”
“This is having a major impact on stocks, foreign exchange and commodities,” she added.
Asian stock markets plunged, with Tokyo diving 1.72 per cent and Hong Kong losing 1.55 per cent, while shares sank 1.17 per cent in New Zealand, where a fatal quake had killed hundreds in Christchurch last month.
London’s FTSE 100 index of leading shares shed 0.29 per cent to 5,828.67 points, while in Paris the CAC 40 dropped 0.89 per cent to 3,928.68 points and in Frankfurt the DAX fell below the 7,000 level, falling 1.16 per cent to 6,981.49 points.
The biggest loser in Europe was the insurance sector, which tumbled as traders worried over the prospect of costly claims from the earthquake – which was the most powerful ever recorded in Japan.
“It is the insurers that have been worst hit by the weaker session today as traders fretted about likely exposures to the Japanese earthquake and tsunami,” said City Index analyst Joshua Raymond.
“The destruction in Japan is convincing investors to cash in some of their (recent) gains in insurance firms, particularly considering it is too early to know exactly what liabilities will be placed on firms as a result of the destruction caused in the region and surrounding areas just yet.”
Shares in European re-insurance groups posted heavy losses, with Munich Re losing 4.28 per cent to 111.75, while Frankfurt’s DAX index dropped 1.16 per cent.
Swiss Re fell 3.54 per cent to 51.70 Swiss francs, meanwhile.
Hannover Re, which says it is the world’s third biggest re-insurance group, dropped 5.28 percent to 38.64 and shares in French re-insurer SCOR lost 5.17 per cent to 19.255.
In foreign exchange trade, the yen sank to 83.30 to the dollar, the lowest point for two and a half weeks, before rebounding sharply as dealers sought a safe haven for their cash.
Prior to news of Japan’s quake, global markets were already on edge before a eurozone summit in Brussels and amid fresh unrest in the oil-producing Middle East and north Africa region.
The eurozone debt crisis escalated this week when Moody’s slashed Greece’s debt ratings and then downgraded Spain on Thursday – the latest in a long list of warnings based on fears that some countries may not repay their debts.
World oil prices dropped yesterday, despite the prospect of unrest in the world’s biggest crude exporter Saudi Arabia, as dealers banked profits ahead of the weekend.