While you were sleeping: Japan quake shakes investors

While you were sleeping: Japan quake shakes investors

(BusinessDesk) April 8 - Stocks in Europe and on Wall Street dropped after another major earthquake hit Japan, rattling investors’ confidence.

The earthquake measuring 7.4 shook northeast and eastern Japan, prompting a tsunami warning for the northeastern coast which was later lifted.

In early afternoon trading on Wall Street, the Dow Jones Industrial Average slumped 0.50%, the Standard & Poor’s 500 Index shed 0.43% and the Nasdaq Composite Index dropped 0.24%.

"Right now I'm waiting to see the extent of the damage, though I've been picking through some stocks to see which could be impacted by disruptions," Tim Hartzell, who oversees US$300 million as chief investment officer for Houston-based Sequent Asset Management, told Reutes.

Hartzell, whose fund invests in Japanese stocks through exchange-traded funds, said he might buy on weakness. "I'm looking at auto manufacturers, and I'm definitely looking to buy Honda if it gets cheap enough."

There was good news, too. U.S. government data showed weekly claims for unemployment benefits fell, the latest sign of a more sustained labour market recovery.

Bed Bath & Beyond Inc jumped more than 9% for the biggest rally in the S&P 500, after the home furnishings retailer forecast annual earnings that surpassed analysts’ expectations.

In Europe, the Stoxx 600 dropped 0.3%, as concern about Japan's latest earthquake wiped out earlier gains.

As expected, the European Central Bank lifted its benchmark interest rate by 25 basis points to 1.25% in an effort to keep inflation at bay. It was the central bank’s first increase since 2008.

ECB President Jean-Claude Trichet said the hike was not necessarily the start of a series, prompting investors to reconsider expectations of further increases any time soon.

The euro was 0.5% lower at US$1.4268, falling from the highest level in more than 14 months reached on Wednesday.

"You're back to a [U.S.] dollar story for the first time in a long time," Frank McGhee, head precious metals trader of Integrated Brokerage Services, told Reuters. "Gold prices and the [U.S.] dollar both benefit from that rate hike because it increases the differentials between euro zone and the U.S. interest rates."

The U.S. dollar rose 0.11% against a basket of currencies.

While rising interest rates typically lower the appeal of gold, investors bought bullion immediately after the ECB’s move amid anticipation of a weakening U.S. dollar, sending the precious metal to another record high.

However, gold gave up those earlier gains after Japan's earthquake.

Spot gold was last 0.1% lower at US$1,456.14 an ounce at 1.14pm EDT. It earlier reached a record US$1,464.80 an ounce.

U.S. gold futures for June delivery fell 0.1% to US$1,357.50 an ounce.

Brent crude for May delivery slipped 15 cents to $122.16 a barrel by noon EDT.

"The news of another Japan earthquake may have panicked the market and prompted some profit taking,"Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut, told Reuters.

There are signs crude futures are taking a breather after the rally to 2-1/2 year highs, but the upward momentum remains intact, according to McGillian.

U.S. May crude futures rose 56 cents to US$109.39 a barrel.

(BusinessDesk)

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