Markets in U.S., Europe Fall 2% on Nuclear Worries, Middle East Tensions

Bikram Pandey
16 Mar, 2011
New York City

U.S. indexes dropped as much as 2% after crude oil gained and Japan struggled to contain radiation leaks. Market decline accelerated after housing starts annual rate dropped to 27-year low and building permits declined to a record low. Crude oil gained as violence in Bahrain intensified.

[R]4:00 PM New York – U.S. indexes dropped as much as 2% after crude oil gained and Japan struggled to contain radiation leaks. Market decline accelerated after housing starts annual rate dropped to 27-year low and building permits declined to a record low. Crude oil gained as violence in Bahrain intensified.[/R]

U.S. indexes struggle on a persistent radiation leak concerns in Japan and resurfacing of sovereign debt worries in Europe. U.S. housing starts and mortgage applications fell and producer prices index increased 1.6% in February.

But it was the low housing starts annual rate that matched the rate last seen in April 2009, the lowest in 27 years unnerved the market.

The market accelerated the losses on the weakness in the housing data compounded with the ongoing tensions in the Middle East and North Africa and Japan’s struggle to contain radiation leak.

United Nations’ nuclear agency agreed to call an emergency meeting after its chief returns from Japan. International Atomic Energy Agency chief Yukiya Amano told reporters in Vienna, Austria that he will be in Tokyo tomorrow to meet authorities in Japan and will hold an emergency meeting upon his return.

About 70% of fuel rods at No. 1 reactor at Fukushima Daiichi plant and nearly third at the No.2 reactor may have been damaged.

Large property and casualty insurance companies around the globe were on the decline for the third day as Japan struggled to put out fires and prevent a meltdown at one of the reactors. The estimate of losses linked to the earthquake and tsunami in Japan have ranged from $180 billion to $195 billion and insured losses are estimated for now at least $35 billion.

Four of the five costliest insured disasters in the last 30 years have occurred in the last thirteen months with two quakes in New Zealand, in Chile and now in Japan.

Across the Atlantic, inflation in most of the euro nations climbed in February and Belgian trade deficit narrowed in January. Czech retail sales surged in January. Iceland retained key rate at 4.25%. Swiss investor confidence improved in March. New car registration in the EU increased 0.9% in February.

Investors refocused on the rising debt yields in peripheral European Union nations and mounting tensions in the Middle East and North Africa. Portugal completed 1 billion euro bonds sale at a higher yield of 4.33%. Wacker Chemie returned to profit.

The UK indexes slid and commodities declined and jobless count rose to the highest since 1994. The UK jobless claims fell unexpectedly but unemployment rate rose to 8%. Rolls-Royce secured Trent 900 engines contract from Asiana Airlines.

Tokyo stocks rebounded 6% after investors took a calmer view and worries of a nuclear radiation leak receded at least for now. The gains were trimmed after another strong aftershock in Chiba Prefecture and a talk of another fire at the troubled nuclear power plant. Tokyo Electric dropped 24% extending 42% losses of the last two days.

Stocks in Mumbai closed higher following gains in Asian markets and a rebound in sentiment ahead of the rate decision tomorrow. The ten largest companies by market cap paid 25% more advance tax for the current quarter.

Australian stocks in a roller coaster ride closed higher tracking the gains in Tokyo markets. Crude oil eased by energy and resource stocks in Sydney rebounded led by the uranium miners. Billabong lowered its earnings outlook and Gindablie Metals revised Western Australia mine project cost 30% to $2.6 billion.

Commodities, Bonds and Currencies

Yield on 10-year bond decreased to 3.21% and on 30-year bond decreased to 4.38%.

The U.S. dollar increased to $1.39 to a euro and decreased against the Japanese yen to 80.14 yen.

Immediate delivery futures of Texas crude oil increased $1.20 to $98.38 a barrel, of natural gas increased 0.004 cents to $3.94 per mbtu and gasoline prices increased 4.49 cents to 284.78 cents a gallon.

In metals trading, copper prices increased 6.65 cents to $4.20 per pound, gold increased $5.20 to $1,398.40 per ounce and silver increased $0.22 to $34.34.