NEW YORK, (Reuters) – Japan’s massive earthquake and deadly tsunami pounded commodity and equity markets worldwide on Friday, while the yen rose on expectations that Tokyo will need to repatriate funds to pay for repairs.
Oil prices slid more than $3 a barrel as investors grappled with the potential economic impact after the Japan’s biggest earthquake on record hit the country’s northeast.
U.S. crude dipped below $100, before paring some losses. Japan is the world’s third largest economy and also the world’s third-largest energy consumer; it imports almost all its energy needs. MSCI’s all-country world index of global stocks fell to a five-week low.
“We need to think what the potential impact on Japanese economy from the quake will be and what the impact on global economy will be,” said Olivier Jakob, with Petromatrix. “That may weigh on oil demand from Japan and the oil price.”
Japanese equity futures fell 3.3 percent, but market players said shares may not suffer too deep a slide because major cities and manufacturing facilities were not damaged by the 8.9 magnitude quake and 10-metre tsunami, which killed hundreds.
Tsunami warnings were lifted for some densely populated Asia Pacific countries previously thought to be at risk.
Copper extended its fall on news of the quake and as Chinese inflation data fuelled concerns over demand from the top consumer of the metal.
Chinese inflation in February topped expectations at 4.9 percent and looked set to climb further in coming months, adding to pressure for another dose of monetary tightening.
“The earthquake is clearly risk-negative, and you have seen continuation of selling that has been going on all week. But there are plenty of other things to make the world unhappy,” said Nick Moore, RBS global head of commodity and strategy.
North Sea Brent fell $1.53 to $113.90, while U.S. light sweet crude was off $2.03 at $100.67.
European shares fell to a 2011 closing low, with insurers among the hardest hit, but U.S. stocks edged higher as U.S. Commerce Department data pointed to strong consumer spending and accelerated growth in the first quarter.
The pan-European FTSEurofirst 300 index of top shares was down 0.7 percent.
“The Japanese earthquake has had a direct impact on the insurers, but investors are also worried about issues like what is going to happen with the Europe stability fund and whether other countries could get downgraded,” said Colin McLean, managing director at SVM Asset Management in Edinburgh, which has about 650 million pounds under management.
U.S. retail sales rose 1.0 percent in February, the largest gain in four months, as shoppers stepped up purchases of autos, clothes and other goods even as they spent more for gasoline.
News that U.S. consumer sentiment fell to its lowest level in five months in early March as gas prices rose later took some of the glow off the retail sales report.
The Dow Jones industrial average was up 15.06 points, or 0.13 percent, at 11,999.67. The Standard & Poor’s 500 Index was up 5.34 points, or 0.41 percent, at 1,300.45. The Nasdaq Composite Index was up 5.78 points, or 0.21 percent, at 2,706.80.
The yen gained against the dollar and the euro, buoyed by expectations repatriated funds will flow in to pay to repair damages caused by the quake and tsunami.
The yen recovered after an initial knee-jerk reaction to sell the currency drove it to a two-week low against the dollar. Analysts said the yen could stay choppy on near-term worries about the impact on a shaky Japanese economy.
Gold slipped but was supported by the safe-haven buying on the earthquake and investor concerns over unrest in the Middle East.
Global equity markets were rattled by worries about the festering European debt crisis and Middle East unrest.
“You have huge global macro events happening and everybody is focussed on these events. You have had almost this perfect storm over the past two days,” said Cort Gwon, chief strategist at HudsonView Capital Management in New York.
U.S. Treasury debt prices dropped on fears that Japanese insurers may need to sell bonds to pay for damages.
The benchmark 10-year U.S. Treasury note shed 12/32 in price to yield 3.40 percent.