Another explosion at a nuclear power station in Japan triggered a 10.55% sell-off in Japanese stocks last night and initiated a massive global flight to safety away from equities into safe haven bonds and currencies. This helps to lower long term mortgage rates.
"The situation at Japan's Fukushima Dai-Ichi nuclear plant worsened overnight with at least one other explosion and fire at the facility," said economists at BMO. "There was some release of radiation and those living within 30km were advised to stay indoors, while those within a 20km range were being evacuated."
Prime Minister Naoto Kan said the risks of further radiation leaks are increasing. Japanese economic minister Kaoru Yosano told reporters the nation's economy is healthy and that stocks are falling because of uncertainty.
S&P 500 futures are a staggering 32.50 points lower at 1,258 and Dow futures have tumbled 232 points at 11,694 - the lowest since early January.
Light crude oil fell 3.24% to $97.93 per barrel, while gold prices surprisingly dropped 2.44% to $1,391.80
Meanwhile, risk averse assets are rallying. Among Treasuries, the two-year yield has firmed 7 basis points to 0.53% and the benchmark 10-year yield has fallen 12.5 basis points to 3.24%. The 2s/10s curve is 6bps flatter at 271bps wide.
"The safe-have Swiss franc and US$ are being bought across the board," BMO reports.
The drop in Japanese stocks marks the biggest single-day decline since October 2008 despite the Bank of Japan injecting 8 trillion yen into money markets. The volume of trading is considered all the more remarkable considering how short-staffed Japanese desks are.
European markets are currently down 2% to 4%, while shares in China finished 1.38% lower and those in Hong Kong fell 2.86%.
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