32 Billion pounds was knocked off the value of London’s blue-chip index today, as the cost of Japan’s devastating earthquake and tsunami saw investors flee riskier equity and commodity assets. There’s now been 3 explosions at the Fukushima nuclear power plant!
With the Death toll from the earthquake and tsunami expected to be in the tens of thousands possibly reaching 100,000 so goes the thinking currently doing the rounds in the City of London.
By 11:47 a.m., the FTSE 100 .FTSE index was down 125.5 points, or 2.2 percent, at 5,649.74 having closed 0.9 percent lower on Monday. The index is down almost 6 percent in March.
“The FTSE is now trading 8 percent off its February highs and with the near term momentum gaining towards the downside,” Joshua Raymond, Market Strategist at City Index, said.
“Traders could be waiting for the UK index to hit the 5,500 level before being enticed back into the market.”
The previous session’s relatively sedate reaction to the disaster in Japan was replaced by panic after Japan’s Nikkei .N225 overnight dropped 10.6 percent, as the cost of the devastation and concern over the ongoing nuclear crisis in the country mounted. The Japanese are notorious for under-estimating and down-playing National emergencies. 620 Billion dollars have so far been wiped off the Japanese Nikkei index over the last two days.
The FTSE volatility index .VFTSE, which measures investor appetite for risk, was up over 15 percent, although volumes on the FTSE 100 were lighter than its European peers.
London’s blue chips traded at just 66 percent it’s average 90-day volume compared to 140 percent on Germany’s Dax .GDAX, with many putting this down to the start of the horse racing festival at Cheltenham.
Miners .FTNMX1770 and Integrated oils .FTNMX0530 were the top fallers, while traders said banks .FTNMX8350 were trimming debt holdings to cover losses from a sharp slide in equities.
London-listed uranium explorers such as Berkeley Resources (BKY.L) and Kalahari Minerals (KAH.L) fell up to 25 percent on concerns over the future of the global nuclear power build programme amid fears of a major radiation leak from the nuclear complex in Fukushima following Japan’s massive earthquake.
MINER HOPES
Traders, however, said longer-term the mining sector should see upside given their lacklustre start to the year and the need for Japan to rebuild.
“Through the short-term volatility in the miners we expect them to move onto the upside (with today’s sell off they are all down between 5-7 percent on the year),” Atif Latif, director of trading at Guardian Stockbrokers, said.
“Once the full impact (of the earthquake) becomes known we expect there to be strong demand for base metals and steel,” he said, adding he also expects a flight to quality bid into utilities, historically a safe haven sector.
Among individual fallers impacted by the disaster in Japan was Luxury goods firm Burberry (BRBY.L), down 4.3 percent, as investors sold stock on concerns over Japanese demand for its goods. Nomura analysts said the firm’s licensing agreements in Japan in total generated around 17 percent of Group EBIT.
ARM Holdings (ARM.L) lost 3.2 percent as the chip designer suffered from disruption to production as a result of the massive quake in Japan.
UK retailers were the only stocks on London’s blue chip index with upside momentum. Next (NXT.L) rose 1.8 percent helped, bullish broker comment, lower cotton prices and results from mid cap department stores group Debenhams (DEB.L), ahead 4.1 percent.
U.S. stock index futures pointed to sharp drops on Wall Street on Tuesday, with investors focussed on the crisis in Japan, but with one eye on U.S. housing market data and, more importantly, the FOMC rate decision due at 6:15 p.m., after the London market close.
Viva!
Daniel
Everyone worried about a Nuclear explosion at these powerplants needs to chill. Prof. Paddy Regan, the guy from the University of Surrey all over the BBC at the moment is one of my lecturers, and is a world expert in the Nuclear field, its why the BBC picked him, just like Sky did back in the days of the Polonium and Russian Spy scandal.
The nuclear reactors just need to be cooled now for a few more days and then it should start becoming much more manageable. As the temperature drops the radiation will drop significantly.
People also dont realise that radioactivity is highly dependent on the type of nuclear reactions occuring. Moving just a km away will cause a highly significant drop in radiation levels. The talk of radiation 160 miles away by the US 5th Fleet is gamma rays, and these pass straight through the body with a pathetically low amount of interaction.
As for the nuclear debate in europe and the UK, it’s stupidity, ignorance, and arrogance on the most part. Stupidity in the sense of we don’t live in a major earthquake region like the pacific rim, so this set of conditions wont occur here. Ignorance of the type of reactors and the safety features put in place. In fact you get more of a radiation dose from the Sun and the Universe than a nuclear reactor. And arrogance of protestors thinking they know better than scientist that have studied these things.
Well Said OSL coundn’t agree more. Good Post
Yet again a typical over-reaction (excuse the pun) to a disaster. I am guessing that less than 0.1% of world industrial manufacturing might has been effected by the disaster yet global markets are dropping by stupid amounts. AIM markets having been hit particularly bad.
This awful disaster however, is an awesome buying opportunity. The markets WILL recover. My guess is in a few days after they have managed to stabilise the nuclear plants and resume power supplies so manufacturing can recommence. The Japanese are a hardy people and work their collective socks off. Everything will be ok soon.
Whilst we all probably agree it is an over-reaction, it is surely not unexpected to see this level of fall as the markets always react in this way. This is Fear at work. If the story for 99% of businesses remains the same, why should they fall. Those with direct exposure to the disaster of course would and should, logically be seen to react negatively, but the markets are anything but logical and it seems the panic spreads throughout all sectors. It is interesting however to note those which seem to have gone relatively unaffected……AHG, FAN, MIN, AAU are examples in my, although others in their sectors have fallen sharply. My cynical side asks whether was it the disaster, or those with influence within the markets who were responsible for the ‘over-reaction’…no names mentioned of course? still those with spare cash now will make a killing.
Dan are you going to comment on mta results Thurs?
I believe this is for year earnings,so it will not have a bearing on close production figures.For Matra this annual RNS will possibly give a false statement of true share value.I predict the share price will drop 5-10%,which will give a superb buying-in / top-up level.Once flow rates are released,watch this baby go !
Not the most responsible picture with this article Dan. We should be trying to calm the PIs, not stoke the fears of nuclear meltdown with a mushroom cloud!
FTSE to hit 5500 before any sustained move north.
Another day or two of volatile trading.
RKH and DES are bucking the trend with likely positive hit from Rockhopper. EO? not sure on this one. Thinking its best to stay out till after result.
GKP, long term is a steal at these prices and where Ive put most of my money, and RKH.