FTSE closes at 15-week low on Japan fears

Markets around the world have been battered by fears for Japan after its key Nikkei index fell more than ten per cent last night.

Fears of a nuclear meltdown in Japan, where another explosion yesterday sent airborne radioactive waste, were combined with worries that the catastrophe would hit its vital car and electronics manufacturing industries and may plunge the economy back into recession.

The FTSE closed at a 15-week low, down 1.4 per cent at 5,695.28, while Germany’s DAX index lost 3.2 per cent to end at 6,648 and France’s CAC 40 closed down 2.5 per cent at 3,781.

“It is fair to say there was a degree of panic selling driving markets this morning after the Nikkei’s staggering ten per cent drop,” IG Index sales trader Will Hedden said.

“Sentiment around the world is likely to remain extremely fragile in the days ahead.”

Miners bore the brunt of the sell-off, though traders did see upside for the sector longer-term given its lacklustre start to the year and the need for Japan to rebuild.

Miner Fresnillo was a target, down 4.4 per cent at 1,433p, on fears that Japan’s industrial base would be hurt, while Eurasian Natural Resources Corp, Lonmin and Antofagasta also lost ground.

Uranium miners were also targeted as world demand for nuclear power plummeted due to the crisis. Kalahari Minerals shed 11.6 per cent on concerns over the future of the global nuclear power plant construction programme after the events in Japan.

Nuclear power-related companies also fell.

“Utility stocks, especially those connected to the nuclear industry have been heavily sold, with German company Eon and French energy company EDF falling heavily after German chancellor Angela Merkel announced the shutdown of seven pre-1980 German nuclear plants for safety checks,” said CMC Markets analyst Michael Hewson.

Luxury goods’ companies were among other major fallers with Burberry down 1.2 per cent, as investors sold the stock on concerns over Japanese demand for its goods.

And investors bought into haven investments such as government bonds.

“Commodity prices have dropped across the board as investors rotate capital into safer haven areas in scenes reminiscent of 2008, as both commodities and equities fall simultaneously,” Hewson said.

US stocks also opened low on the news from Japan, but revived to close just one per cent lower after the Federal Reserve put out an upbeat view of the economy.

The market also responded to growing sentiment that Japan's nuclear crisis would only temporarily depress shares, with some traders calling the selloffs “overdone”.

Equities nearly halved their losses after the Fed stuck with its ultra-loose monetary policy and said the economy was gaining traction.

The Dow Jones industrial average ended down 137.74 points, or 1.15 per cent, at 11,855.42; the S&P 500 was down 14.52 points, or 1.12 per cent, at 1,281.87; and the Nasdaq Composite Index was down 33.64 points, or 1.25 per cent, at 2,667.33.