FTSE falls to a 15-week low over Japanese nuclear fears

BRITAIN’S top share index fell to its lowest closing level in 15 weeks yesterday as fears about a nuclear catastrophe in Japan prompted investors to shun risky assets.

The FTSE 100 ended down for a fifth consecutive session, off 79.96 points, or 1.4 per cent, at 5,695.28, wiping nearly £21bn off the market.

The index has declined almost five per cent in March.

A crippled reactor at the nuclear complex in Fukushima exploded and sent low levels of radiation floating toward Tokyo, prompting some people to flee the capital and others to stock up on essential supplies.

Radiation levels in the city of Maebashi, 100 kilometre (60 miles) north of the capital, Tokyo, were up to 10 times normal, Kyodo news agency said, quoting the city government.

“Obviously the markets are dominated by the situation in Japan. With explosions at the Fukushima reactor, the newsflow is taking quite a negative turn with regards to contamination,” said Ed Woolfitt, head of trading at Galvan Research.

“I think all news flow and market moves in the short term are going to be driven by events there – whether or not they get it stabilised and calmed, or indeed whether it takes a turn again for the worse.”

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.

London-listed uranium explorer 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.

Luxury goods companies were among other major fallers as Japan is one of their major markets. Burberry fell 1.2 per cent, as investors sold the stock on concerns over Japanese demand for its goods.

Nomura analysts said the firm’s licencing agreements in Japan in total generated around 17 per cent of group core profit.

ARM Holdings lost 1.5 per cent as the chip designer suffered from disruption to production as a result of the Japan quake.

Some analysts said the FTSE index’s depressed levels could be seen as a buying opportunity.

“If the market heads towards 5,000, then it is getting towards a prospective PE (price-earnings ratio) of about 12 times, and that means that the yield of the market is getting to around 4 per cent,” said Jeremy Browne, an analyst from Fairfax.

“Now, 10-year bond yields are 3.7 (per cent) and cash returns are about 1/2 a per cent. It can be a real sign for buying of the market when the yield of the equity markets gets greater than the 10-year bond yield market.”

He added that a move towards the 5,000 level could go hand in hand with a pick-up in M&A activity – “and when you get big cash deals, that will get the stock market rising.”