Japan fears give markets a roller-coaster ride

Global markets were buffeted by competing fears of international crisis yesterday, with equities cautiously stabilising after the Japanese earthquake, only for the spreading unrest in the Middle East to send the oil price shooting upwards.

Japan's Nikkei initially led the stock market gains yesterday, closing up by 6 per cent after heavy falls earlier in the week. The tentative recovery spread across Asia with rises on Hong Kong's Hang Seng, in Shanghai and on India's benchmark Sensex index.

But investors' jitters remained close to the surface, sending markets reeling at the slightest provocation. Warnings of "possible catastrophic events" and a Japanese nuclear power plant "effectively out of control" from the EU energy commissioner, Günther Oettinger, sent US and European stocks tumbling and bonds soaring briefly in the afternoon. Then an admission from Mr Oettinger's spokeswoman that the comments were general rather than specific pared the losses. US stock markets then again plunged more than 2 per cent in late afternoon trade after the head of the US Nuclear Regulatory Commission told Congress that the US safety regulator would have recommended a larger evacuation area, while more countries, including the UK, told their nationals to consider leaving Tokyo.

The Tokyo Stock Exchange and Japan's financial regulators ignored calls for a halt to trading and said Japanese stock markets would remain open.

Concerns about the political situation in the Middle East vied with fears about Japan, giving oil prices a roller-coaster ride. London Brent crude rose by more than $2 to top $111 per barrel as news of violent clashes in Yemen and Syria, a crackdown on protesters in Bahrain, and ongoing battles in Libya fuelled concerns about supplies from the troubled region.

Last month, the Egyptian revolution sent oil to a two-and-a-half-year high of $119. But oil dropped to a three-week low on Monday as traders bet that the dip in demand because of the closure of quake-hit Japanese refineries would more than offset a surge in demand for fossil fuels as the country's nuclear power stations remained offline.

Other commodities also rose after a dip in response to the disaster in Japan. Copper gained for the first time in six days, while gold continued to benefit from investors' flight to safety. Agricultural commodities such as wheat, corn and soya beans also saw a sharp jump yesterday. And rubber gained for the first time in four days after Bridgestone, the world's biggest tyre company, restarted its three Japanese plants.