Japan's Nikkei ends down 6% in first post-quake session

Nikkei 225 Index

Last Updated at 26 Dec 2014, 01:45 ET Nikkei 225 one month chart
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Japanese shares have tumbled on the first trading day after the massive earthquake and tsunami that hit the country's north-east shore.

Amid record share trading, the Nikkei index ended down 6.18% at 9,620 points.

The benchmark crude oil price fell to less than $99 a barrel on weaker demand from the world's third-largest economy.

Meanwhile, the Bank of Japan tried to support the economy, saying it would inject 15 trillion yen ($183bn; £114bn) into the banking system.

Production was stopped at some of Japan's best-known companies, heavily denting their share prices.

European stocks also began the day lower, with German shares hit hardest. The main Dax index fell 1.3%, dragged lower by power companies and insurers.

The UK's FTSE 100 and France's Cac 40 indexes were down about 0.3%.

In Japan, carmaker Nissan was down by 9.5% after it shut all its plants, while Toshiba, whose products include semiconductors and nuclear reactors, fell 16%.

A Toshiba competitor, Hitachi, also fell 16% and shares in Tokyo Electric Power Company fell by 24%.

Honda, Japan's third-largest carmaker, fell 9.1%.

With production stopped in a number of major factories and therefore the demand for power reduced, the price of oil fell.

Brent crude lost 2.4% to $111.16, a two-week low, while US light, sweet crude fell by $1.37 to $99.79.

But industrial and materials companies gained on hopes they will be in demand once Japan starts rebuilding.

Construction company Kajima rose 17.9% and Nishimatsu Construction soared 21%.

Start Quote

Moody's warned that the natural disaster could bring forward the moment of a potential financial calamity, which would be the moment when investors lose confidence in Japan's ability to repay its debts.”

End Quote
Bank support

Early share trading was complicated because many sellers of shares struggled to find buyers.

As a result, a number of stocks remained untraded after the markets had opened. By the end 4.88bn shares had changed hands.

Immediately after the quake, the central bank pledged to "do its utmost" to limit its impact, including providing liquidity to money and banking markets. Details of the pledge, a 15 trillion yen cash injection, was released over the weekend.

The deadly quake and subsequent tsunami hit Japan just before the markets closed on Friday.

"The recent major earthquake is bound to exert downward pressure on Japanese equities as a whole over the near term," Nomura said in a note to investors.

Start Quote

People might see an already weakened Japan, overshadowed by a growing China, getting dealt the finishing blow from this quake”

End Quote Koetsu Aizawa, Economics professor, Saitama University
Strong yen

Japanese Economics Minister Kaoru Yosano was quoted by the Jiji news agency saying that he was keeping a close eye on the movement of Japan's currency, the yen, which has strengthened.

Economists said that a stronger yen may make it harder for companies to sell their goods abroad, further hurting their earnings.

Analysts said that there were concerns about the speed with which Japan's economy could rebound from the problems.

Last month Japan was overtaken by China as the world's second-largest economy.

"In the short term, the market will almost surely suffer and stocks will plunge," said Koetsu Aizawa, economics professor at Saitama University.

"People might see an already weakened Japan, overshadowed by a growing China, getting dealt the finishing blow from this quake."

Some analysts have forecast that Japan's economy may lose as much as a percentage point in growth this year because of the quake.

Japan's economy contracted by a more-than-expected 1.3% in the final three months of 2010.

Rebuilding effort

Production and trade will fall in the short term, analysts say, but could 'surge back'

However, while there are concerns about the short-term impact on the economy, there are industries where investors are looking to increase their holdings.

Shares in Japanese construction firms have surged in value on Monday as they are expected to play a central role in rebuilding the country in coming months.

Foreign firms have also been in focus, notably technology producers and carmakers, where shares have been gaining.

Investors, for example, are expecting an increase in orders for Korean goods because production has been suspended in many of Japan's factories.

South Korea's Kospi index was up by 0.5%, although elsewhere in the region major markets were lower. Hong Kong's Hang Seng index as down by 0.4%.

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