Japanese nuclear crisis hits markets

CONCERNS over Japan's nuclear crisis sent world stock markets tumbling yesterday as panicked investors headed for the exit.

The FTSE 100 Index dropped 3 per cent at one stage before recovering to close 79.96 points lower at 5,695.28.

There were similar declines across Europe and America as shareholders fretted over the potential threat to economic recovery and the impact of Japan's disaster on global manufacturing supply chains.

The Dow Jones Industrial Average on Wall Street fell around 1.8 per cent in early trading, while the Dax in Germany plunged 3 per cent and France's Cac 40 was 2.5 per cent down as investors dumped shares in technology and car manufacturers that rely on Japanese suppliers for parts.

Japanese stocks had earlier taken another hammering after the Nikkei closed at a two-year low amid fears over the radiation leak at the Fukushima plant panicked investors. Japan's leading stock market has now suffered the worst two-day fall since the 1987 stock market crash.

Analysts said the need for Japanese investors to repatriate funds in advance of the country's rebuilding programme was also impacting world markets.

In addition, Bahrain's King Hamad added to the unease by declaring a three-month state of emergency in order to quell political unrest.

Will Hedden, sales trader at IG Index, said: "After Monday's resilience, it is fair to say there was a degree of panic selling driving markets after the Nikkei's staggering 10 per cent drop in Asian trading.

"Although radiation has been reported to be falling at the Fukushima nuclear plant, there is uncertainty surrounding just how long Japan's economic activity will be effectively suspended - and the corresponding effect this could have on global manufacturing and the wider recovery."

In currency news, the pound dropped against the dollar, with the nuclear concerns triggering a flight to stronger currencies. Sterling fell to $1.61 and €1.15.

The uncertain global growth prospects affected mining stocks, with Fresnillo the worst affected with a 66p drop to 1,433p.

BP shares were 8.1p lower at 451.3p, while Shell fell 14.5p to 2,071p despite upgrading its target for output in 2014. In a strategy update, Shell said it had 20 new projects on the drawing board as it set out a target of 3.7 million barrels of oil equivalent a day, an increase of 12 per cent on 2010.

Luxury goods firm Burberry fell a further 13p to 1,110p - having dropped 4 per cent on Monday - due to fears it will lose a big slice of revenues from Japan.

Insurer Prudential, which has a small presence in Japan but depends on the Asian region for much of its growth, was down 23p at 695p.

On a brighter note, shares in department store Debenhams rose by as much as 4 per cent after it said headline profits in the first half of its financial year were expected to be ahead of last year and in line with market consensus.The update was met with relief by investors, although the stock later retreated, easing back 0.7p to 58.1p.

Dundee-based medical testing kit maker Axis-Shield was down 9p at 305p despite recommending its maiden dividend.