Wednesday, March 16, 2011

Stocks hit by Japan fears despite Nikkei rally


LONDON – Shares around the world failed to capitalize on a bounceback in Japanese stocks Wednesday amid concerns about an escalating nuclear crisis in the wake of the country's devastating earthquake and tsunami.
Talking Numbers: Tough Month
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Japan's benchmark Nikkei 225 stock average closed up 5.7 percent at 9,093.72 as investors snapped up bargains after panic selling sent the index spiraling down nearly 11 percent the day before.

Another massive monetary injection from the Bank of Japan — to a total of almost $700 billion in short-term loans — and an indication from the government that it could buy into the stock market also helped shore up the Nikkei. On Tuesday, the index closed at its lowest level in almost two years after shedding 16 percent over two days, its biggest two-day retreat in forty years.
Japan's powerhouse exporters also rebounded. Toyota Motor Corp., the world's No. 1 auto maker, shot up 9.1 percent, Sony Corp. rose 8.8 percent, and truck-maker Isuzu Motors closed 10.5 percent higher.
Heavy industry shares rose as the shock of the disaster gave way to thoughts of rebuilding. Kobe Steel soared 15 percent and Nishimatsu Construction Co. Ltd. jumped 5.8 percent higher.
The recovery in Japan's market gave Asian stocks a lift, but the momentum failed to carry through to Europe, where most of indexes were down on concerns over some of Japan's nuclear reactors. Japan temporarily suspended work to prevent a stricken nuclear plant from melting down after a surge in radiation made it too dangerous for workers to remain at the facility.
With reports of fires at the nuclear reactors and worries of more aftershocks, the markets were in a jittery mood.
"It would be premature at this stage to believe that any sense of stability is returning to the financial markets, given the geological and economic uncertainties," said Neil MacKinnon, global macro strategist at VTB Capital.
In Europe, the FTSE 100 index of leading British shares was down 0.8 percent at 5,649 while Germany's DAX fell 0.3 percent to 6,630. The CAC-40 in Paris was down 1 percent at 3,743.
Wall Street was also set to open lower following big falls on Tuesday — Dow futures were down 23 points at 11,176 while the broader Standard & Poor's 500 futures fell 3.3 points to 1,272.10.
In currency markets, the yen remained buoyant, partly through its widely perceived status as a safe haven in times of stress. By mid-morning London time, the dollar was down 0.3 percent at 80.68 yen, barely a yen above its post-World War II low of 79.75 yen, achieved back in 1995 soon after the Kobe earthquake.
The appreciating yen is an additional worry for Japanese policymakers as it has the potential to price already-vulnerable exporters out of the international marketplace. Though the Bank of Japan has pumped colossal amounts of money into the money markets over the past couple of days to support liquidity, analysts said it may be tempted to buy up dollars to rein in the export-sapping rise in the currency.
"The Bank has its work cut out keeping a lid on yen strength and as such the market needs to be wary of further central bank intervention," said Michael Hewson, market analyst at CMC Markets.
Though the dollar is losing ground against the yen, it is advancing against the euro, partly because Europe's single currency often suffers in times of increased risk in markets.
Expectations of a rate hike in the eurozone will likely have been tempered by news that core inflation rates — which exclude volatile energy, food and tobacco costs — dipped to 1 percent in the year to February from 1 percent in January.
Following its policy meeting earlier this month, the European Central Bank's president Jean-Claude Trichet gave a heavy hint that the bank was poised to raise its benchmark rate from the current record low of 1 percent next month due to high headline inflation. Figures Wednesday confirmed that the rate was 2.4 percent in the year to February, above the ECB's target of "close to but below" 1 percent.
Meanwhile, investors are also monitoring the situation in Libya as the regime of longtime leader Moammar Gadhafi escalates its fight against the rebels and heads towards the coastal town of Benghazi, which has been under rebel control for almost a month.
Uncertainty over instability in the oil-rich Middle East kept oil prices supported Wednesday following the previous day's big declines, when fears of a nuclear meltdown in Japan hit prices hard.
Benchmark crude for April delivery was up $1.32 at $98.50 a barrel in electronic trading on the New York Mercantile Exchange.
Earlier in Asia, South Korea's Kospi added 1.8 percent to 1,957.97 while Hong Kong's Hang Seng rose 0.1 percent to 22,700.88. Mainland Chinese stocks rose too, with the Shanghai Composite Index gaining 1.2 percent to 2,930.80 and the Shenzhen Composite Index rising 1.1 percent to 1,307.96.

News Source: Yahoo


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