Japan disaster pummels world stocks

 Source: Reuters

By Al Yoon

NEW YORK, March 14 (Reuters) - World stocks slid to six-week lows on Monday as the devastating toll from Japan's earthquake, tsunami and nuclear crisis continued to unfold, raising fears of the impact on industries ranging from insurance to power generation.

Oil prices fell on expectations of slower demand from Japan, the world's third largest economy and a major oil importer. Growing unrest in a Yemeni area bordering Saudi Arabia, the world's largest oil exporter, limited the decline in oil prices.
Japanese stocks posted their biggest daily decline since October 2008 in record volume as traders considered economic losses. The Nikkei index .N225 closed off 6.2 percent and the broader TOPIX index .TOPX slumped 7.5 percent.

The worst earthquake on record in Japan has triggered worries that global growth would suffer a setback just as the world economy is emerging from the effects of the financial crisis. Japan's recovery costs could top $180 billion, or 3 percent of its annual economic output and more than 50 percent higher than the costs of the 1995 earthquake in Kobe, economists said.

"The earthquake could have great implications on the global economic front," said Andre Bakhos, director of market analytics at Lek Securities in New York. "If you shut down Japan, there could be a global recession."

Japanese gross domestic product may slide by 1 trillion yen in 2011, or about 0.2 percentage point, Hiromichi Shirakawa, a Tokyo-based economist at Credit Suisse, said in a client note. But deteriorating consumer confidence and production cuts could worsen the GDP drop as much as 1 percentage point, he added.

Before the disaster, Shirakawa estimated Japan growth would slow to 1.4 percent this fiscal year from 3 percent in 2010.

The U.S. dollar rebounded from near-record lows against the yen after the Bank of Japan announced a series of policy easing measures to shore up the economy.

Gold rose, recovering some of last week's losses, as the Japanese quake and heightened political unrest in the Middle East and North Africa drove safe-haven buying, driving prices toward recent record highs.

The MSCI world equity index .MIWD00000PUS slowed its fall in North American trading, but still traded down 0.84 percent to levels last seen in late January. It is down more than 4 percent from its February peak. The Thomson Reuters global stock index .TRXFLDGLPU shed 1.1 percent.