Stocks, Commodities Fall on Japan Disaster

(Bloomberg) -- Global stocks fell, following a plunge in Asia that sent the Nikkei 225 index to its biggest two-day drop since 1987, amid concern a nuclear accident outside of Tokyo may cripple the global economy. Commodities slid, while the Standard & Poor's 500 Index pared its loss almost by half.

The MSCI World Index fell 2.5 percent at 1:54 p.m. in New York after the Nikkei sank 10.6 percent to the lowest since April 2009. The Standard & Poor's 500 Index tumbled 1.6 percent after losing as much as 2.7 percent. Ten-year Treasury yields slid seven basis points to 3.28 percent. The Swiss franc rose against all 16 major peers, climbing to a record against the dollar. Oil lost 2.7 percent to $98.44 a barrel.

Credit-default swaps insuring Japanese debt climbed to a record earlier as Tokyo Electric Power Co.'s damaged nuclear power plant was rocked by two explosions today as workers struggled to avert a meltdown in the wake of last week's earthquake. Equities also dropped as Saudi Arabian troops moved into Bahrain with a regional force in the first cross-border intervention since uprisings swept through parts of the region.

"It's effectively a retreat from risk assets after a long period of running towards risk," said Michael Vogelzang, who helps manage $1.7 billion as president and chief investment officer at Boston Advisors in Boston. "The situation in Japan has clearly deteriorated and the economic and financial impact is unknown, and that's why the market is selling off. We don't know what the lack of investor confidence in Japan means for the U.S. and the world."
Biggest Drop

The Nikkei 225's one-day drop was the biggest since October 2008 and extended its two-day slide to 16 percent. South Korea's Kospi Index sank 2.4 percent, the most in four months, while Taiwan's Taiex Index retreated 3.4 percent, the most since February 2010.

Credit-default swaps on Japan's government debt soared 23 basis points to 118.5 after reaching a record 122.3, according to CMA, and Tokyo Electric's jumped 224.2 basis points to 373.5, up from 40.5 on March 11.

Trading in a U.S. exchange-traded fund linked to Japanese stocks shows investors expect shares in the world's third- largest economy to rebound when trading there resumes. The iShares MSCI Japan Index Fund tracking 323 securities fell 2 percent to $9.85 after earlier reaching $9.24, its lowest intraday level since July. That compares with the 9.1 percent plunge in the MSCI Japan Index earlier, data compiled by Bloomberg show......read on