Asian Stocks, U.S. Futures Tumble on Japan Quake; Gold Gains

By Shiyin Chen and Shani Raja -

The Nikkei 225 plunged 5.5 percent and the MSCI Asia Pacific Index was 1.5 percent lower at 133.02 as of 9:26 a.m. in Tokyo. Photographer: Haruyoshi Yamaguchi/Bloomberg

Asian shares fell, with the Nikkei 225 Stock Average tumbling the most since 2008, after Japan’s biggest earthquake on record sent oil lower and spurred a jump in gold and default risk. The euro rose after European leaders agreed to expand a rescue fund for cash-strapped governments.

The MSCI Asia Pacific Index sank 3.1 percent to 130.88 as of 1 p.m. in Tokyo and the Nikkei 225 plunged 6.2 percent. Standard & Poor’s 500 Index futures slid 0.5 percent. The cost of protecting Japan’s sovereign and corporate bonds from non- payment surged. The yen weakened against 12 of 16 major currencies after the central bank injected 15 trillion yen ($183 billion) into the financial system. Crude oil retreated for a fifth day in New York, while gold advanced 0.4 percent.

Prime Minister Naoto Kan said yesterday Japan is facing its worst crisis since World War II after a March 11 earthquake and ensuing tsunami killed an estimated 10,000 people and caused explosions at a nuclear power plant. In Europe, officials broadened the size and scope of their 440 billion-euro ($614 billion) bailout fund and eased the terms of Greek rescue loans in a pact struck in the early hours of the weekend.

“I expect a weaker tone to pervade Asian markets,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “Uncertainty about the ultimate impact of Friday’s earthquake and tsunami are likely to see investors adopt a cautious stance.”

Toshiba, Posco

About three stocks dropped for each that gained on MSCI’s Asia index. Toshiba Corp., a maker of nuclear reactors, and Tokio Marine Holdings Inc., Japan’s second-largest casualty insurer, paced losses on the Nikkei 225. Posco, South Korea’s biggest steelmaker, rallied 6.4 percent, leading gains among steel and construction-material suppliers on speculation of increased demand from reconstruction in Japan.

The temblor and tsunami may have killed 10,000 people in Miyagi prefecture north of Tokyo, according to the local police department. The official toll reached 1,597, with 1,481 more missing and 1,683 injured, the National Police Agency said. More than 350,000 people are in emergency shelters.

Japan’s bonds rose for a second day, pushing yields on benchmark five-year notes down by the most since October 2008. The rate slid 10 basis points to 0.465 percent. Five-year credit-default swaps on Japanese government debt surged 13 basis points to 92 points, the biggest increase since February 2009 and the highest level in eight months, according to prices from Deutsche Bank AG and data provider CMA.

Bond Risk

The Markit iTraxx Japan index soared 20.5 basis points to 118 points, the biggest gain since May 25, according to Deutsche Bank AG and CMA. Credit-default swaps on Tokyo Electric Power Co., which is battling to avoid a meltdown at its Fukushima nuclear plant, jumped 70 basis points to 112.5 points, Deutsche Bank AG said. That’s the highest on record, according to CMA data going back to 2004.

The yen retreated from a four-month high as the Bank of Japan added money to the financial system and on speculation policy makers will intervene in foreign-exchange markets by selling the currency to aid exporters. The government sold 2.12 trillion yen in September in its first intervention since 2004. The currency hit 80.22 per dollar on Nov. 1, the strongest since April 1995, when it reached a postwar record of 79.75.

The yen reached a high of 80.62 today, before trading at 82.16 from 81.84 in New York last week. It also fell 0.5 percent to 114.37 per euro. Bank of Japan Governor Masaaki Shirakawa told reporters yesterday that he’s ready to unleash “massive” liquidity as policy makers seek to assure financial stability.

‘Significant’ Accord

The euro climbed 0.2 percent to $1.3925 after the region’s leaders negotiated an accord to allow primary-market bond purchases that will offer a lifeline to aid recipients in return for austerity commitments. The deal broke a deadlock as policy makers sought to extinguish a crisis that has raged for more than a year and forced Greece and Ireland to seek financial aid.

Leaders will allow the facility to spend its full 440 billion-euro capacity, removing restrictions that would have capped outlays at about 250 billion euros, though it won’t be used to finance bond buybacks for debt-strapped states. A final agreement is slated for a summit on March 24-25.

“The European accord is quite significant and a better outcome than the market was expecting so that will be a positive or the euro,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “With the ECB looking to hike rates in April the euro could be ripe to break that key $1.40 level in the near-term.”

Oil for April delivery fell 1.5 percent to $99.62 a barrel on concern Japan’s quake will limit demand in the world’s third- largest economy and crude user.

Copper for three-month delivery decreased 0.9 percent to $9,110 a metric ton on the London Metal Exchange on concern that the earthquake will hurt metals demand in the coming months as carmakers and other Japanese manufacturers suspend or curtail output. Aluminum and nickel also dropped. Gold for immediate delivery climbed for a second day, trading at $1,422.73 an ounce.