After ignoring Japan for 10 days, world markets got a reminder yesterday that the world’s third biggest economy continues to be hurt by the impact of the tsunami, earthquakes and the Fukushima nuclear crisis which won’t go away.
Markets around the world fell around 1% or more, the biggest fall for a month as investors took profits from shares.
Commodities also tumbled on profit taking and fears the big run up was too much.
Three big aftershocks in less 24 hours, a fire and more problems at Fukushima and a move by the Japanese Government to raise the crisis to a rating of 7, the highest there is on the international scale (and equal to Chernobyl in 1986), combined to rattle market confidence.
Then there’s the continuing uncertainty in Libya and worries about the high oil prices and whether the current strong market boom was getting overbought.
Coming after the International Monetary Fund reminded us that some economies are not strong, by cutting growth estimates for the US, Japan and UK, plus some smaller economies, such as Australia, markets fell.
The IMF was upbeat about the global economic outlook (although it cautioned about the possible impact of rising oil pries).
But investors ignored that as news from Japan reminded them that the world’s third most important economy was weakening and would become weaker before a hoped for recovery later this year.
US markets took a hit in late trading on Monday after the first quake, a 6.6 magnitude rattler late yesterday near Fukushima (almost a month to the hour after the March disaster hit) and the S&P 500 lost 0.6% and oil and other commodities weakened.
A call from Goldman Sachs that some commodity price rises (copper, soybeans, cotton and oil) were overdone and it was time to take profits, hit markets late Monday and yesterday as well.
Yesterday morning news of the second quake, a 6.2 magnitude one, the Japanese Government upgrade, further problems at Fukushima and the upgrade in the intensity of the crisis, pushed markets in Asia lower again.
European markets were off 1.5% and Wall Street lost nearly 1%.
The Thomson Reuters/Jefferies CRB Index of 19 commodities fell nearly 2% overnight.
That was after a 0.7% drop on Monday after climbing to the highest level since September 2008.
The MSCI Asia Pacific Index lost 1.3% and Tokyo’s Nikkei 225 Stock Average slumped 1.7%, and the Australian market was off 1.5%.
Markets in Hong Kong and South Korea also fell by more than 1%, but China’s market wasn’t as weak, down just 0.1%.
European markets also eased.
A third quake late yesterday, more than 6 magnitude, added to the fears going into the European trading day.
The yen rose against the dollar, the Australian dollar fell against most other currencies and South Korea’s won fell the most in seven weeks.
The Australian dollar fell to around $US1.0420, down around three quarters of a cent on the day. It recovered to $US1.0475 in US trading.
Oil had the biggest two-day drop since November, copper slid 0.6% and corn lost 0.8%.
S&P’s GSCI Index of 24 raw materials fell 1.3% yesterday, extending Monday’s 1.3%.
Spot gold in New York fell 1% to $US1,453 an ounce in New York.
Copper for three-month delivery fell half a per cent on the London Metal Exchange, and 1.6% in New York. Wheat in Chicago fell while wheat slid 1% on Monday and 4.75% overnight.
New York (Nymex) oil for May delivery fell 1.5% percent to $US108.30 a barrel in after-hours electronic trading yesterday after a 2.5% fall on Monday.
It fell further in European and US trading to be down to $US105.99, a loss of 3.6% on the day.
The March 11 quake, tsunami and the first stages of the Fukushima disaster prompted the IMF to downgrade Japan’s economic outlook, confirming bearish comments late Tuesday from the Bank of Japan.
Yesterday’s quake in Chiba prefecture, closer to Tokyo, rocked eastern Japan today, swaying buildings in central Tokyo and closing runways at Narita airport, the country’s main international facility.
Japan has now experienced more than 400 major aftershocks stronger than 5.0 in magnitude since March 11.
Japan’s Nuclear Industry and Safety Agency (NISA), the country’s nuclear safety watchdog, told national broadcaster NHK that it raised the crisis level to seven as the damaged facilities at the plant were continuing to release large amounts of radioactive substances.
Tokyo Electric Power Co (TEPCO), the operator of the crippled nuclear plant, which is 240 kilometres north of Tokyo, said that its workers were fighting a fire near damaged reactor No.4. News of that fire came only minutes after yesterday’s quake struck.
It added to the sense of deepening crisis by saying yesterday that it is concerned that radiation leakage at the plant could eventually exceed that of the 1986 Chernobyl catastrophe.
The Japanese Government revealed that it was looking at the expansion of the evacuation zone around Fukushima to 40 kilometres because of the persistent nature of the radiation still escaping from the damaged reactors.
That is not a sign the crisis is improving.
