Asian stocks fell as Japan quake

Japanese stocks fell sharply in late trading on Friday after a powerful earthquake rocked the northern coast of the country, triggering tsunamis and produced tremors that shook buildings in Tokyo.

News of the quake, which struck in the closing minutes of stock market trading in Tokyo, accelerated a fall caused after hefty overnight losses on Wall Street and amid lingering worries over the political turmoil in the Middle East.

The quake — the worst ever in Japan since at least 1891 — had a magnitude of 8.9 and its epicenter was 231 miles northwest of Tokyo, according to the U.S. Geological Survey. Tsunami warnings were also issued for many other countries, including Mexico, New Zealand, Indonesia and Taiwan. Several people were injured in Japan, with nearly four million buildings in and around Tokyo losing power, while fires broke out in many buildings, according to reports on the NHK World news channel.

Japan’s Nikkei Stock Average (JP:NI225 10,254, -179.95, -1.72%) ended 1.7% lower at 10,254.43, with losses deepening in the final minutes of trading, following reports of the quake. Shares of MS&AD Insurance Group Holdings Inc. (MSADF 25.90, +0.15, +0.58%) (JP:8725 2,015, -67.00, -3.22%) fell 3.2%, Japan Petroleum Exploration Co. (JPTXF 0.00, 0.00, 0.00%) (JP:1662 3,715, -125.00, -3.26%) dropped 3.3% and Fast Retailing Co. (JP:9983 12,250, -370.00, -2.93%) (FRCOY 15.35, -0.13, -0.84%) gave up 2.9%.

“It’s probably too early to really assess the impact... There’s always a knee-jerk reaction to such things,” said Andrew Sullivan, director for institutional sales at OSK Securities. “

“The tsunami wave seems to be creating a lot of damage, so the insurers are probably going to be badly hit by that. You generally see construction companies see do quite well after [a quake]... What people will look at before Monday is how [Japanese companies’] American Depository Receipts trade in the U.S. tonight,” he added.

In volatile foreign-exchange trading, the yen fell sharply immediately after the earthquake was reported, before bouncing back against the U.S. dollar. The greenback was recently buying 82.79 yen, after moving in a range between ¥82.63 and ¥83.30.

Japanese government bonds soared after the earthquake, with the lead JGB futures contract rising 0.66 to 139.20 points, while the yield on 10-year cash JGBs fell three basis points at 1.270%.

Dow Jones Industrial Average (DJIA 11,985, -228.48, -1.87%) futures were down 68 points in screen trade, while April Nymex crude oil futures fell $1.40 to $101.30 per barrel on Globex.

Stocks in some other Asian markets also extended losses in the wake of the temblor, notably in Hong Kong and India, amid fears of damage to Japan’s economy from the quake.

Hong Kong’s Hang Seng Index (HK:HANGSENG 23,250, -365.11, -1.55%) finished 1.6% lower, China’s Shanghai Composite (CN:SHCOMP 2,934, -23.35, -0.79%) dropped 0.8%, Taiwan’s Taiex fell 0.9%, South Korea’s Kospi gave up 1.3% and Australia’s S&P/ASX 200 (AU:XJO 4,645, -54.85, -1.17%) slid 1.2%, while in afternoon trading, India’s Sensex (XX:SENSEX 18,179, -149.19, -0.81%) was 1.3% lower.

Among the losers, China Overseas Land & Investment Ltd. (CAOVY 0.00, 0.00, 0.00%) (HK:688 13.44, -0.42, -3.03%) fell 3% in Hong Kong and Sterlite Industries Ltd. (SLT 14.27, -0.52, -3.52%) (IN:500900 160.45, -4.75, -2.88%) fell 2.5% in Mumbai trade.

Most Asian markets were already lower after China reported its monthly inflation data earlier in the day, raising fears of further monetary tightening in the country.

China’s February consumer price index rose 4.9% from a year earlier, unchanged from 4.9% in January, but topped expectations for a 4.8% rise, according to the median forecast in a Dow Jones poll of analysts. China’s producer price index, a measure of pipeline inflation pressures, rose 7.2% from a year earlier, up from January’s 6.6% rise and higher than expectations for a 7.0% rise.

The CPI report was “the single biggest sell factor this afternoon across all of Asia,” Mitsuhige Akino, chief fund manager at Ichiyoshi Investment Management, said in Tokyo.

The fresh worries about more tightening measures from Beijing weighed on interest-rate sensitive stocks in Hong Kong and China. Among banks, China Merchants Bank Co. (CN:600036 13.66, -0.33, -2.36%) (HK:3968 19.94, -0.53, -2.59%) shed 2.6% in Hong Kong and 2.4% in Shanghai.

“The market should be prepared for a reserve ratio requirement and rate hike in the next couple of weeks,” Bank of America-Merrill Lynch economist Lu Ting wrote in a note. “The chance of a rate hike could be quite high in the second half of March or early April.”

China’s central bank governor Zhou Xiaochuan said Friday at a news conference interest rates are an important policy tool.

Even before the China data, regional sentiment was depressed on reports Thursday that Saudi Arabian police fired rubber bullets to disperse about 200 Shiite protesters in the eastern town of Qatif.

Australian shares were lower across the board, slightly extending their losses after the China data. But tensions in the Middle East and Libya are a greater drag on Australian shares than the Chinese inflation figures, said Ric Spooner, chief market analyst at CMC Markets.

“There’s nothing in those China figures to cause a substantial change to people’s views on the China growth view,” Spooner said, even if Beijing takes steps to slow its economic growth. Uncertainty over oil prices were a “significantly larger variable” than China’s inflation, he said, noting sustained higher oil prices could force people and businesses to cut back on spending to meet the higher costs.

Among heavyweight miners, Rio Tinto Ltd. (RIO 63.57, -3.17, -4.75%) (AU:RIO 78.80, -1.62, -2.01%) was down 2% and BHP Billiton Ltd. (BHP 88.31, -3.91, -4.24%) (AU:BHP 44.19, -0.44, -0.99%) fell 1%.

Among other markets, New Zealand’s NZX 50 dropped 0.7% and Philippine shares fell 0.9%. In afternoon trade, Singapore’s Straits Times Index shed 1.4% and Thailand’s SET gave up 1.3%.

In foreign-exchange trade, the euro was at ¥114.60, from ¥114.36 in late New York trade Thursday, and at $1.3829 from $1.3799 in late New York trade Thursday.

Spot gold was at $1,415.20 per troy ounce, up $4.10 from its New York settlement Thursday

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