Japanese crisis sparks huge sell-off

Reuters and AFP

SEOUL/HONG KONG, Shares and other risky assets from the Australian dollar to commodities such as copper and oil slumped on Tuesday, while safe-haven assets like U.S. Treasuries rallied as Japan’s nuclear crisis worsened. Rising radiation levels at an earthquake-hit nuclear plant in northeastern Japan triggered a huge sell-off in Japanese shares and panic hoarding of food and other supplies in Tokyo.

At one stage, Nikkei futures were down 16 percent before paring losses to 10 percent, while the benchmark Tokyo stock index ended down almost 11 percent, its biggest one-day percentage loss since October 2008.

The Nikkei has lost around 17 percent of its value since a massive earthquake and tsunami struck the country on Friday, leading to explosions at several nuclear plants and forcing thousands of factories to shut.

“The downside is completely open-ended at the moment as headlines come through,” said Roland Randall, a strategist at TD Securities in Singapore, adding that markets would react negatively until the nuclear threat is contained.

Stocks in the rest of Asia as measured by MSCI fell nearly 3 percent as the nuclear crisis worsened and the MSCI world index slid 1.2 percent.

Australian shares fell 2.1 percent, with shares of uranium miners extending losses as some countries indicated they were rethinking plans for nuclear power in the wake of the Japan disaster. “It is like pricing an unknown risk. The comments from Japan pushed the market off the edge,” Shane Oliver, head of investment strategy at AMP Capital in Sydney said. South Korea fell 2.4 percent, led by nuclear power plant designer KEPCO Engineering & Construction, which plunged 15 percent. The U.S. dollar soared to just above 82.00 yen on trading platform EBS from near 81.40 before settling back to near 81.65 yen, little changed on the day and not far from a record low of 79.75 struck in 1995.

U.S. Treasuries rallied on the global flight to safe assets as risk aversion overpowered concerns that Japanese insurers would sell Treasuries to fund payouts at home, which would also boost the yen.

Yields on 10-year U.S. Treasuries fell further to 3.24 percent from 3.37 percent earlier in the day, although they were off the day’s lows.

The U.S. Federal Reserve’s policy-making Federal Open Markets Committee meets on Tuesday and although the Fed is seen exiting its stimulus earlier than Japan, few are expecting policy to change during this meeting.