Mumbai: The earthquake in Japan and the fear over a nuclear meltdown emerged as the major concern as investors tried to figure out the economic effects of the tragedy. Here are some thoughts from the blogosphere on the topic.
Satyajit Das has an irreverent post on the panic in markets after the quake and the role of speculation in the knee-jerk reaction.
Das writes: In perhaps the most bizarre moment to date, Guenther Oettinger, the 57-year-old former premier of the German region of Baden-Wuerttemberg, told a committee of the European parliament that the earthquake-damaged nuclear plant was now “effectively out of control” and foretold “further catastrophic events”. He urged people to leave Japan, stating that the “whole thing is in God’s hands”. Financial markets plunged, in part at his comments. Curiously, Mr Oettinger had no special information or any expertise in nuclear power generation. His spokeswoman later clarified that: “He just wanted to share his concern and that he was really touched by all the images of people and the victims…”
Das points out that parallels to Kobe might be misleading as many Japanese manufacturers have relocated to other locations in Asia, Europe and US to minimize costs since 1995.
Read more at: http://tinyurl.com/4gu28wg
Economist Ajay Shah points out that volumes on the yen-rupee futures on NSE have seen a sharp spike after the quake.
“The most important arbitrage which should be at work is in the currency triplet INR/USD, USD/JPY and JPY/INR. But unfortunately, currency futures trading in India does not include the USD/JPY contract, so one crucial leg of the arbitrage is not readily available. With turnover like $100 million in a day, I’m sure some people are doing such arbitrage in some painful ways,” concludes Shah at http://tinyurl.com/2mnmqe
Damage to nuclear plants is likely to lead to higher demand for oil, which could have pushed up oil prices towards the end of the week, wrote Tyler Durden.
Durden wrote in a 17 March post: With the world’s attention diverted to Japan for the past week, WTI managed to drop substantially trading just above $96. Well, just as we predicted a few days ago observing the ongoing developments in Bahrain and Libya, and the imminent realization that Japan will need to boost its petrochemical imports due to drop in nuclear power output, crude spike by the most in over a week, in what was virtually a straight line touching $102/bbl and closing just below.
A rise in oil prices could threaten a fragile global recovery, wrote Paul Krugman, Nobel laureate. Krugman highlights that rising crude oil prices might cost growth and the decline in copper prices is an indication of the same.
“Copper is basically about the prospects for world economic growth: strong growth means lots of copper demand. Oil is partly about growth, but also about chaos in the Middle East. And over the past month, copper is way down, while oil has surged,” writes Krugman at http://tinyurl.com/6x49bew.