Quake may trigger asset sales

Dubai: The biggest earthquake on record to hit Japan may prompt insurance firms to sell assets to pay for damages, and investors were watching on Friday to see if they dispose of US government debt to raise cash.

The massive quake left analysts seeking market guidance from Treasury bond and yen charts after the 1995 Kobe earthquake hit Japan. Yields on 10-year Treasuries rose by about 20 basis points in a bond market sell-off in the days following the Kobe disaster.

Investors are worried insurers and reinsurers exposed to the country may need to sell assets to pay claims. However, traders said there was no evidence so far that Japanese investors were selling bonds, though that didn't stop others. Some analysts downplayed the potential impact of the Japanese earthquake on the Treasuries market, based on the market reaction following the 1995 Kobe quake. Others said it was too early to tell what the eventual influence of the earthquake might be on Treasuries.

Euro

The Eurozone's lower-rated states can expect little relief from investors this week, analysts said on Friday, with an EU summit unlikely to counter growing pessimism over a solution to the bloc's debt crisis. The meeting of Eurozone leaders, to be concluded late on Friday, is only expected to throw support behind a watered-down version of a German-French plan to boost competitiveness. Leaders are not expected to agree to widen the scope of the Eurozone rescue fund, making it unlikely for any easing of periphery pressures ahead of another European Union summit later this month, said analysts. Safe-haven Bund futures surged after the earthquake hit Japan and as unrest in the Middle East intensified although oil prices eased after a "day of rage" in Saudi Arabia drew little participation.

Portugal's bond yields soared to euro lifetime highs last week, reinforcing the view that the country will have to seek an EU bailout.

Range for previous week: $1.3750-$1.4037 (Dh5.0504 - Dh5.1558). Range for this week: $1.3690-$1.4100 (Dh5.0283-Dh5.1789).

Sterling

June gilt futures hit a contract high on Friday, and yields on 10-year gilts fell to a six-week low after a massive earthquake in Japan and worries about peripheral Eurozone debt boosted their safe-haven appeal. International news overshadowed domestic data showing factory gate prices rose at their fastest annual rate in more than two years in February.

Short sterling contracts rallied as much as 9 ticks across the strip as investors figured that an uncertain global economic outlook reduced the likelihood of the Bank of England starting to tighten monetary policy soon. The central bank left interest rates at a record low 0.5 per cent on Thursday.

Range for previous week: $1.5975-$1.6342 (Dh5.8676 -Dh6.0024). Range for this week: $1.5915-$1.6400 (Dh5.8455-Dh6.0237).

Yen

Japanese stock futures fell 3.3 per cent on Friday after the massive earthquake in Japan, but market players said the share slide may not be too deep because major cities and manufacturing facilities were not affected. The yen bounced back from an initial dip to rise on the day, a move reflecting some expectations that Japanese investors could bring back funds from their hefty foreign investments as happened in the weeks after the 1995 Kobe earthquake.

While the full extent of the quake's damage was still being assessed, analysts said the television video, pictures and reports so far did not suggest a major economic and financial disaster. One worry is the potential impact from reconstruction spending on Japan's stretched finances for a country that is already the world's most indebted industrialised nation, by some measures.

Range for previous week: 81.64 yen-83.29 yen (Dh0.044098-Dh0.044990). Range for this week: 81.00 yen-83.90 yen (Dh0.043778 -Dh0.045345).