Asian stocks drop on Japan quake, bonds jump – ET

Posted on March 11, 2011 by

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Asian shares dropped after a massive earthquake hit Japan, violently shaking the capital Tokyo, darkening an already bleak mood caused by weak economic data and unrest in Saudi Arabia.

The quake struck just before the close of Tokyo stock trading. Japan’s Nikkei average closed at an intraday and five-week low, down 1.7 percent on the day.

Hong Kong’s Hang Seng share index was down 1.8 percent, and Nikkei futures in Singapore tumbled more than 3 percent. At 0650 GMT, Nikkei June futures were down 2.8 percent at 10,075 , though they later rebounded and investors expected the broad fall would not be prolonged.

Japanese stocks “will probably fall on Monday, especially of those companies that have factories in the affected areas, but on the whole the sell-off will likely be short-lived,” said Mitsuhsige Akino, a fund manager at Ichiyoshi Investment Management, after the market closed on Friday.

European stock index futures indicated a lower opening. Futures for the Euro STOXX 50 , Germany’s DAX and France’s CAC were down 0.7 to 0.8 percent.

The magnitude 8.9 quake shook buildings in Tokyo, causing “many injuries” and triggered a four-metre (13-ft) tsunami , NHK television and witnesses reported.

The yen extended losses against the dollar after the quake, falling to 83.29 yen to the dollar compared with 82.80 before it struck.

Japanese government bond futures surged, briefly rising more than a ful point after the quake struck, while trading in cash bonds was suspended.

“This will certainly lead the government to compile an emergency budget,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo. “The government would have to sell more bonds, but this is an emergency, so this can’t be avoided.”

Brent crude held near $115 per barrel as investors monitored developments in the Middle East. Forces loyal to Libyan leader Muammar Gaddafi battled rebels at an oil port, while Saudi police fired in the air to disperse protesting Shi’ites.

Oil prices are up by a quarter this year, with most of the gains coming since the Libyan crisis erupted.

While oil prices around this level posed no substantial threats to the world economy or financial markets, the risk that prices may rise to damaging levels has risen substantially, Barclays Capital strategists said.

Chinese inflation in February remained close to 5 percent, suggesting tighter monetary policy may be needed, adding to the uncertainty.

Weak U.S. economic data spurred some profit taking in shares in developed markets which have enjoyed a handsome run this year, though some bargain buying checked losses.

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Posted in: APAC