By: Dr. Mike Campbell
Hard on the heels of the worst two-day loss that the Nikkei has seen in 40 years, the Nikkei 225 managed to recoup some of its losses yesterday, closing 5.7% higher. Trading was described as “highly volatile” with the markets reacting badly to fresh news of problems at Fukushima and surging ahead as and when better news emerged.
Some analysts have suggested that the bounce is due to the fact that short sellers had been counting on a worse performance from the exchange and needed to buy stock to minimise their losses when the market proved more robust than anticipated.
Thinking Globally
Markets around the world have also fallen as traders price-in the knock-on effect of the Japanese disaster. Apart from supplying finished goods for the export market, Japan supplies components to other nation’s industries; notably electronic components. 20% of the world’s semiconductor needs are met by Japan and the nation furnishes 40% of flash memory chips which are essential components in computers and many domestic electronic products. Traders have been pricing-in the impact of disruption of the supply chain to Japan’s customers. On Tuesday, the Dow fell by 1.15% whilst the Dax fell by 3.2%.
Stocks in nuclear related companies and uranium mining activities fell on concerns of a re-think of the politically-lead renaissance of the nuclear industry. Germany has temporarily shutdown 7 nuclear power plants which were constructed before 1980 and the European Union is arranging for “stress tests” (whatever that may mean in the context of a nuclear reactor) for all of the block’s nuclear capacity. Given that no fatalities have resulted from the nuclear emergency and the environmental releases of radiation seem to be relatively unimportant, it is a remarkable over-reaction, particularly in light of the unprecedented and devastating triggering event.