Stocks plummet as Japan faces $180bn recovery bill
Fears catastrophe could threaten global economic recovery as markets fall to six-week low
World stocks slid to six-week lows yesterday as the devastating toll from Japan's earthquake, tsunami and nuclear crisis continued to unfold, raising fears of the impact on industries ranging from insurance to nuclear power.
Oil prices fell on expectations of slower demand from Japan, the world's third-largest economy and a major oil importer. But growing unrest in a Yemeni area bordering Saudi Arabia, the world's largest oil exporter, limited the decline.
Japanese stocks posted their biggest daily decline since October 2008, in record volume, as traders considered the economic losses. The Nikkei index closed off 6.2pc and the broader TOPIX index slumped 7.5pc.
The worst earthquake on record in Japan has triggered worries that global growth will suffer a setback just as the world economy is emerging from the effects of the financial crisis.
Japan's recovery costs could top $180bn, or 3pc of its annual economic output and more than 50pc higher than the costs of the 1995 earthquake in Kobe, economists said.
"The earthquake could have great implications on the global economic front," said Andre Bakhos, director of market analytics at Lek Securities in New York. "If you shut down Japan, there could be a global recession."
Japanese GDP may slide by 1 trillion yen in 2011, or about 0.2pc, Hiromichi Shirakawa, a Tokyo-based economist at Credit Suisse, said in a client note. But deteriorating consumer confidence and production cuts could worsen the GDP drop as much as 1pc, he added.
The US dollar rebounded from near-record lows against the yen after the Bank of Japan announced a series of policy easing measures to shore up the economy.
Gold rose, recovering some of last week's losses, as the Japanese quake and heightened political unrest in the Middle East and North Africa drove safe-haven buying, driving prices toward recent record highs.
The MSCI world equity index fell in North American trading, down 1pc to levels last seen in late January. It is down more than 4pc from its February peak. The Thomson Reuters global stock index shed 1.2pc.
Emerging market equities were lifted by construction and refinery shares on expectations of large-scale reconstruction efforts in Japan as the country confronted what officials there called its biggest crisis since World War Two.
The pan-European FTSEurofirst 300 index dropped 1.2pc, while emerging markets stocks rose 0.7pc.
The Dow dropped 51 points, or 0.43pc, to 11,993. The broader S&P 500 Index shed 0.6pc to 1,296 and the Nasdaq Composite Index fell 15 points, or 0.54pc to 2,711.
Luxury goods firms were among the worst hit. (Reuters)