“A perfect storm batters markets,” said analyst Kathleen Brooks at trading site Forex.com on Friday. “Three factors are weighing on market sentiment: the Japanese quake, Spain’s sovereign debt downgrade (and) 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% and Hong Kong losing 1.55%. London’s FTSE 100 index shed 0.29% to 5,828.67 points, in Paris the CAC 40 dropped 0.89% to 3,928.68 points, and in Frankfurt the DAX fell below the 7,000 level, falling 1.16% 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.
In foreign exchange trade, the yen sank to 83.30 to the dollar, the lowest point for two-and-a-half weeks, before rebounding as dealers sought a safe haven for their cash.
It rose to 81.86 yen to the dollar at Friday’s close, from 82.91 late on Thursday.
Prior to Japan’s quake, global markets were already on edge before a eurozone summit in Brussels and amid fresh unrest in the oil-rich Middle East and North Africa region.
The eurozone debt crisis escalated last 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.
The euro rose to $1.3872 at Friday’s close from 1.3794 on Thursday.
World oil prices dropped on Friday, despite the prospect of unrest in the world’s biggest crude exporter Saudi Arabia, as dealers banked profits ahead of the weekend and bet that Japan’s consumption of oil would dip at least temporarily.
Oil had spiked to two-and-a-half-year highs in recent days amid escalating violence and supply shortfalls in Libya.
US stocks fell at the opening bell but later recovered and were in positive territory at Friday’s close.
The Dow Jones Industrial Average had added 0.13% to 11,999.67, and the tech-focused Nasdaq Composite rose 0.21% to 2,689.65.
The broader S&P 500 was up 0.41% to 1,301.34.