Daily Analysis – Radiation Panic Sends Nikkei Tumbling 1000 Points

SamTrader1

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Equities

News of radiation leaks at nuclear power plants in Japan sent Asian markets tumbling. The Nikkei plummeted 10.5%, dropping more than 1000 points to 8605, a 2-year low. Shares had fallen as much as 14% at one point during the day. The Kospi fell 2.4%, the Hang Seng dropped 2.9%, and the Shanghai Composite closed down 1.4%.


Panic Selling Hits the Nikkei

The selling continued in Europe, as the Dax fell 3.2%, and the CAC40 dropped 2.5%. The FTSE closed down a more moderate 1.4%. Luxury goods companies sold off on expectations that sales to Japan, a major consumer, will be severely impacted by the crisis.

US markets opened sharply lower, and spent the day recovering. The Dow opened down nearly 300 points, but managed to closed down just 138, at 11855. The Nasdaq recovered from an initial 3% loss to close down 1.3%

Solar stocks extended their gains, as radiation worries fueled interest in alternative energy sources. First Solar jumped 8.2% and SunPower surged 10.8%.

Treasuries and Commodities

Long bonds rallied as investors ran to safety, sending the 30-year note up 1 6/32 to yield 4.45%. The 10-year note rose modestly, gaining 12/32 to yield 3.331%.

Heavy selling hit commodities on concern that a serious drop in Japanese economic activity will cut demand. Oil ell 3.77 to 97.42, even as Bahrain declared martial law amid ongoing protests. Gasoline futures fell 5.3%, and Brent crude sank 4.9%.

Gold fell 2%, dropping to 1395.60, while silver tumbled 4.5%. Copper inched up .2%.

Agricultural futures suffered steep losses. Sugar plummeted 7.7%, and wheat dropped 7.4%, leading the declines.


Currencies

The yen surged, climbing 1.3% to 80.70, while the dollar rose against most other currencies. The Australian dollar dropped 2%, as the commodity currency relies heavily on Japanese imports.

Initially, the dollar surged as panic unfolded, but the currency markets slowly calmed. The Euro ended flat, reversing losses of 1% from the morning. The Pound slipped .7% to 1.6074, and the Canadian Dollar fell 1.1%, well off earlier losses exceeding 2%.

The flight to safety pushed the Swiss Franc to record highs of .9140, and closed at .9164, up .8%.

Economic Outlook

The Fed reiterated its commitment to the bond buying program, even as they acknowledged the economy was recovering. Homebuilder confidence rose to 17, its highest level since May 2010. The Empire State Index rose to 17.5, more than expected.

Wednesday’s reports will include Housing Starts, PPI, and weekly mortgage applications and oil inventories.

Japan’s crisis has managed to outshine the disruptions in Libya, the ongoing unrest in the Middle East, and the debt problems facing European nations. These unresolved global tensions are likely to have significant impact on world economies in the coming months.
 
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