New York: Fear of a nuclear catastrophe in Japan pounded world stock markets on Tuesday, shredding $1 trillion (Dh3.67 trillion) in equity valuations as investors dumped assets considered risky and sought the safety of government debt.
Gold fell 3 per cent at one point, on track for its biggest one-day loss since July, as the worldwide rout in stock markets forced speculators to sell bullion to cover equity losses.
The global wave of risk aversion slammed oil prices, driving Brent crude futures below $108 for the first time in three weeks.
"Investors around the world have been collectively trying to reduce their risk exposures across the board," Mohammad Al Erian, the co-chief investment officer at Pacific Investment Management Co in Newport Beach, California, told Reuters.
"This is a vivid illustration of top-down factors totally dominating bottom-up considerations when it comes to investor positioning," said El-Erian, who helps oversee $1.1 trillion in assets.
European shares fell to their lowest level in three-and-a-half months, the Nasdaq was on the cusp of turning negative for the year and Japan's Nikkei average sank 10.6 per cent, marking its worse two-day sell-off since 1987 as reports of rising radiation near Tokyo rattled investors.
US stocks tumbled, sending the Standard & Poor's 500 Index to a two-month low. The S&P 500 retreated 1.8 to 1,273.43 at 11:29am in New York, below its lowest close since January 11. The Dow average decreased 210.4 points, or 1.8 per cent, to 11,782.76. The Nikkei 225 Stock Average sank 11 per cent yesterday and is down 16 per cent so far this week, the biggest two-day drop since October 1987.
The market dropped sharply at the start of trading on news that dangerous levels of radiation are leaking from a crippled nuclear plant at the nuclear complex in Fukushima following last week's disaster.
Investors sold because of the uncertainty about the impact the nuclear crisis.
Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners, said fear had taken hold in the market. "It's a situation where you sell, and you ask questions later," he said.
All ten company groups in the S&P fell. Technology stocks fared the worst, falling 2.4 per cent. Many US companies are dependent on Japanese factories for components. And power outages have made it nearly impossible for Japanese factories to produce semiconductors and other electronics, said Kim Caughey, equity research analyst at Fort Pitt Capital Group.
Jabil Circuit, which makes parts for electronics and other technology companies, fell 3 per cent.
Energy stocks also fell as the price of oil fell below $100 a barrel. Crude was down $3.95 at $97.22 a barrel as analysts anticipated lower demand because of the earthquake. Exxon Mobil Corp. and Chevron Corp. were each down about 1 per cent. Insurance companies that do business in Japan also fell sharply. Aflac Inc. was down 10 per cent. The health and life insurance company does about 75 per cent of its business in Japan, but said it was well prepared to handle claims in the country. Hartford Financial Services Group Inc., which also has operations in Japan, fell 6 per cent.
