Continued pressure from natural disasters and geopolitical issues (ISFM) (11-03-2011)

Stock markets had been on a losing trend even before the earthquake hit Northeastern Japan after the overnight drop on Wall Street and the yen lost ground only to recover as it proved resilient to this natural disaster which comes on top of the recent troubles the country has been through.

In Asia, stocks had been falling also on the release of China data on inflation, but as the quake hit near the close of the Asian trading session, investors went on to sell even more strongly, with losses led by insurers. Tsunami alerts have been instituted in place all round the Pacific Rim, from Australia all the way up to the west coast of the US, spooking investors over the potential consequences to the world economy.

European stocks followed the drop in their Asian counterparts after the reported deathly earthquake in Japan, the most powerful earthquake in more than 100 years, which triggered a tsunami and as well as tsunami warnings for several countries as well as parts of the U.S. West Coast and Hawaii. Here also insurers were leading losses with companies the likes of Swiss Re and Munich Re retreating by as much as 6%. Pressure in European markets was also due to ongoing concerns, generated by the region’s debt issues and the continuing conflict in Libya.

As a result of the massive earthquake in Japan, oil prices have dropped below $100 per barrel for the first time in more than a week while it is to early to tell the extent of the impact to its economy from this natural disaster.

Benchmark West Texas Intermediate for April delivery tumbled $2.80, or 2.7 percent, to $99.90 per barrel on the New York Mercantile Exchange. The price crossed the $100 mark last week because of Middle East tension. It was around $86 just three weeks ago.

Back on Wall Street, US stocks opened lower after the earthquake in Japan as well as on the accelerating inflation reported in China, which topped expectations in February at 4.9 percent and looked set to climb further in coming months, adding to pressure for another dose of monetary tightening.

Source: ISFM