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United States News Title: U.S. Stocks Pare Drop After Tokyo Plunge; Oil Falls, Bonds Gain Global stocks fell, following a plunge in Asia that sent the Nikkei 225 (NKY) index to its biggest two-day drop since 1987, amid concern a nuclear accident outside of Tokyo may cripple the global economy. Commodities slid, while the Standard & Poor’s 500 Index pared its loss almost by half.
The MSCI World (MXWO) Index fell 2.5 percent at 1:54 p.m. in New York after the Nikkei sank 10.6 percent to the lowest since April 2009. The Standard & Poor’s 500 Index tumbled 1.6 percent after losing as much as 2.7 percent. Ten-year Treasury yields slid seven basis points to 3.28 percent. The Swiss franc rose against all 16 major peers, climbing to a record against the dollar. Oil lost 2.7 percent to $98.44 a barrel.
Credit-default swaps insuring Japanese debt climbed to a record earlier as Tokyo Electric Power Co.’s damaged nuclear power plant was rocked by two explosions today as workers struggled to avert a meltdown in the wake of last week’s earthquake. Equities also dropped as Saudi Arabian troops moved into Bahrain with a regional force in the first cross-border intervention since uprisings swept through parts of the region.
“It’s effectively a retreat from risk assets after a long period of running towards risk,” said Michael Vogelzang, who helps manage $1.7 billion as president and chief investment officer at Boston Advisors in Boston. “The situation in Japan has clearly deteriorated and the economic and financial impact is unknown, and that’s why the market is selling off. We don’t know what the lack of investor confidence in Japan means for the U.S. and the world.”
Biggest Drop
The Nikkei 225’s one-day drop was the biggest since October 2008 and extended its two-day slide to 16 percent. South Korea’s Kospi Index (KOSPI) sank 2.4 percent, the most in four months, while Taiwan’s Taiex Index retreated 3.4 percent, the most since February 2010.
Credit-default swaps on Japan’s government debt soared 23 basis points to 118.5 after reaching a record 122.3, according to CMA, and Tokyo Electric’s jumped 224.2 basis points to 373.5, up from 40.5 on March 11.
Trading in a U.S. exchange-traded fund linked to Japanese stocks shows investors expect shares in the world’s third- largest economy to rebound when trading there resumes. The iShares MSCI Japan Index Fund tracking 323 securities fell 2 percent to $9.85 after earlier reaching $9.24, its lowest intraday level since July. That compares with the 9.1 percent plunge in the MSCI Japan Index earlier, data compiled by Bloomberg show. ‘Rich Economy’
The yen rose against 15 of its 16 major counterparts, climbing 0.9 percent to 80.91 per U.S. dollar. Japanese investors will repatriate funds as the nation seeks to recover from the quake, said Mohamed El-Erian, chief executive officer at Pacific Investment Management Co.
“We know that inflation will spike because of shortages and because of supply chain disruptions, and we know that the deficit and public debt are going to increase significantly,” El-Erian, who’s also co-chief investment officer, said in a telephone interview on “Bloomberg Surveillance” with Tom Keene. “Fortunately, Japan is a rich economy, and the private sector has saved a lot. Japan can navigate this.”
Prime Minister Naoto Kan called for calm as the government battled to cool three quake-damaged nuclear reactors with seawater. Chief Cabinet Secretary Yukio Edano said this afternoon radiation readings outside damaged reactors were falling below harmful levels, while a fire at a separate unit appeared to have been put out. Earlier today, Edano said the steel unit containing the radioactive core of one reactor had been damaged and warned of dangerous contamination. GE Slides
The S&P 500 declined for the fourth time in five days, with technology, industrial, utility and financial shares leading declines of at least 1.1 percent in all 10 industry groups. The gauge is up 1.6 percent in 2011 and has rallied 89 from its bear-market low in March 2009.
General Electric Co., which is in talks to sell reactors to India, sank 2.7 percent to help lead the Dow Jones Industrial Average down more than 200 points. The Fukushima plant consists of six reactors based on GE designs, three of which were built by the company.
Aflac Inc. and Hartford Financial Services Group Inc. led declines in 21 of 22 companies in the S&P 500 Insurance Index on concern that operations and investments in Japan will be hobbled. Aflac, which gets three-quarters of its revenue in Japan, lost 6.8 percent and Hartford sank 5.2 percent. Energy Stocks
Nuclear power stocks slumped for a second day on concern the Japanese incidents will hurt the industry. Shaw Group Inc. (SHAW), the U.S. engineering company that has a nuclear power partnership with Japan’s Toshiba Corp., retreated 2.1 percent. Uranium Energy Corp. (UEC) slid 17 percent to $3.26, the lowest since September, and Uranium Resources Inc. (URRE) dropped 18 percent.
Solar-power stocks rallied on speculation that clean energy will benefit. First Solar Inc. (FSLR) advanced 5.8 percent for the second-biggest gain in the S&P 500. Trina Solar Ltd. (TSL) gained 8 percent and LDK Solar Co. rose 7.9 percent.
U.S. stock-index futures maintained losses before the open of exchanges even as a report showed manufacturing in the New York region accelerated in March at the fastest rate in nine months. The Federal Reserve Bank of New York’s general economic index rose to 17.5 from 15.4 in February. Economists projected an increase to 16.1, based on the median forecast in a Bloomberg News survey.
Labor Department figures showed a 1.4 percent increase in the import-price index, exceeding the 0.9 percent median forecast in a survey. Prices excluding fuel rose 0.3 percent. Food costs over the past 12 months posted the biggest gain since records began in 1977.
European Stocks
The Stoxx Europe 600 Index lost 2.3 percent, its worst drop since November, as the VStoxx Index (V2X), which gauges the cost of protecting against declines in the region’s shares, surged 16 percent to the highest level since November. Volkswagen AG and Daimler AG led automakers lower. German utilities RWE AG and E.ON AG fell more than 2.8 percent each after Chancellor Angela Merkel put plans to extend the life of nuclear plants on hold for three months.
The 30-year Treasury bond yield slid 6 basis points to 4.47 percent, with the 10-year yield declining to the lowest since Dec. 10.
The 10-year German bund yield dropped 9 basis points to 3.14 percent, while the yield on the country’s two-year note sank 11 basis points to 1.53 percent.
Belgium said it postponed a sale of six-year bonds because of market volatility caused by the Japan nuclear crisis.
Credit-default swaps on Bahrain jumped 35 basis points to 348.8, the highest since July 2009, according to CMA. The Bloomberg GCC 200 Index (BGCC200) of Persian Gulf shares sank 2.5 percent and Saudi Arabia’s Tadawul All Share Index (SASEIDX) lost 3.5 percent, the biggest slide in almost two weeks. ‘Potential Escalation’
“In addition to the tragic events in Japan, the market had to contend with a potential escalation of the Middle East situation,” Gary Jenkins, head of fixed-income at Evolution Securities Ltd. in London, wrote in a client note. “It would not be a surprise if the significant price moves of the last couple of days did not lead to problems elsewhere in the financial system.”
Emerging-market stocks tumbled the most in eight months, currencies sank and borrowing costs rose. The MSCI Emerging Markets Index declined 2.4 percent, heading for the biggest drop on a closing basis since June 29. The extra yield on emerging- market debt over U.S. Treasuries jumped 9 basis points to 2.76 percentage points, JPMorgan Chase & Co.’s EMBI+ Index showed. Won, Rand
The cost to insure against tumbles in South Korea’s won and South Africa’s rand surged. One-month options giving investors the right to sell the rand cost 2.46 percentage points more than contracts to buy, compared with 2 percentage points yesterday, the biggest increase since April, according to data compiled by Bloomberg. The premium to sell the won rose to 3.69 percentage points from 2.93, the biggest surge since November.
Brent crude for April settlement fell 2.8 percent to $110.50 a barrel as Japanese refinery shutdowns reduce the demand for oil. U.S. gasoline futures fell as much as 6.2 percent to $2.7768 a gallon in New York electronic trading.
Copper for delivery in May fell 0.9 percent to $4.1495 a pound in New York. Silver for immediate delivery retreated 4.7 percent to $34.23 an ounce, dropping for the first time in three days. Platinum, palladium and gold also fell.
Derivatives tied to rates for capesize ships used to haul coal and iron ore also fell, on speculation the earthquake will disrupt demand. Forward-freight agreements, traded by brokers and used to hedge or bet on future shipping rates, dropped 6.1 percent to $14,300 a day, according to data from Clarkson Securities Ltd., a broker of the contracts.
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#1. To: A K A Stone (#0)
Sorry. Can you fix the title please?
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