European stocks ended sharply lower yesterday, despite an earlier bounce in Tokyo, amid growing fears over Japan’s worsening nuclear crisis, Bahrain unrest and a ratings downgrade for Portugal.
Tokyo rallied almost six per cent on bargain-hunting after a fierce two-day sell-off, leading an Asian rebound, amid stubborn concerns over a potential nuclear disaster in Japan after last Friday’s deadly earthquake and tsunami.
At the European close, the London FTSE 100 index of leading shares fell by 1.7 per cent to 5,598.23 points.
The mood was even worse on French and German bourses, with the CAC 40 falling 2.23 per cent to finish the day at 3,696.56 points while in Frankfurt the DAX slumped 2.01 per cent to 6,647.66 points.
“Given near-term uncertainties ... we expect foreign investors will stay on the sidelines till we get some clarity on the Japan situation,” said Atif Latif, head of equities at Guardian Stockbrokers in London.
Japan’s nuclear crisis deepened with another fire at a quake-hit atomic power plant and a radiation spike there that forced the temporary evacuation of workers.
The markets were further rocked by comments the European Union’s energy commissioner Guenther Oettinger, who said the situation at Japan’s disaster-hit nuclear power plant had spun out of control.
“The site is effectively out of control,” he told a European Parliament committee, one day after he said Japan was facing “apocalypse.”
“In the coming hours there could be further catastrophic events which could pose a threat to the lives of people on the island,” he said.
US markets joined the drive downwards as the Japan nuclear crisis, renewed concerns about eurozone debt and rising tensions in the Arab world left markets on edge.
The Dow Jones Industrial Average dropped 52.98 points (0.45 per cent) to 11,802.44 around 1420 GMT.
The tech-rich Nasdaq Composite lost 4.88 points (0.18 per cent) at 2,662.45, while the broad-market S&P 500-stock index retreated 3.72 points (0.29 per cent) to 1,278.15.
Federal Reserve policymakers kept ultra-low interest rates and $600 billion stimulus spending in place on Tuesday, as they noted easing unemployment, a pick-up in consumer spending and growing business optimism.
“Despite a solid rebound in Japanese equity markets following the two-day tumble to more than a two-year low, US equity markets are under some pressure as euro-area debt concerns and festering uneasiness in the Middle East and North Africa are back in focus,” Charles Schwab analysts said in a client note.
In Asia, the Nikkei jumped back after suffering its heaviest two-day drop for 24 years, as crews struggled to prevent a catastrophe at Fukushima.