NEW YORK shaken by the prospect of nuclear collapse after the devastating earthquake and tsunami, are Japanese investors of dump foreign assets on Monday and bring their money home, to help finance reconstruction.
Positioning for this could send down the dollar against the yen on Monday and lead to a sharp slide in treasuries as U.S. Government bonds are favorite asset of Japanese investors, said market analysts.
Shares are likely to come well under pressure.
Japanese insurer will probably sell some of its most liquid foreign assets such as U.S. treasuries, so that they can respond to the worst disaster since World War II.
The crisis could lead to insured losses of nearly $35 billion, risk modeling firm AIR worldwide said, is one of the most expensive natural disaster in the history and almost as much as the entire global catastrophe loss for the global insurance industry.
Dealer for just such an outcome on Friday, when the yen rose and Government bonds were tight. The Bank of Japan is to limit the liquidation assets probably add money to the system. But the big question remains of how much follow through will still be the sale.
Dan foot, the Vice President $ 150 billion Loomis Sayles, told of Reuters on Sunday that his best guess is that treasuries will continue to see losses under.
Since Japan is the second largest holder of U.S. government debt and they have nearly $900 billion in dollar reserves, foot said that Japan will probably use reserves for the rebuild.
"A large buyer is taken from the bonds of the market," said feet, adding that Japan "less their reserves to buy Treasuries to and less able to be able."
Japan's crisis can also be a new reason, press on with the long-awaited pullback in shares offer.
Much depends on the price of oil, which fell on Friday on concern that the Japanese earthquake would hit global economic sentiment. There was upheaval in the region over the weekend from the recent highs reached on the revolts in North Africa and the Middle East, but continued - especially with a protest in Saudi Arabia.
Investors will help determine their usefulness in the grim exercise, which companies will benefit from the world's third largest economy rebuild.
"You could expect to do industrial infrastructure companies to see." "As for the negative, I see General markets it with long-term," said Paul Hickey, co-founder of bespoke investment group.
"I remember after the last big tsunami in Indonesia there was a widespread view that it would be devastating, but there was no great effect." "Granted, this is a much more developed region and certain insurance companies have greater exposure than others, but business will continue outside this region go to."
Shares remain elastic in the midst of a variety of risk factors typically relatively recently. World shares have come from heights, but are still at year up date benefits, in particular thanks to the developed markets.
Prime Minister Naoto Kan described the crisis as Japan's worst since 1945, as officials confirmed that three nuclear reactors at risk of overheating were raise fears of an uncontrolled radiation leak.
The disaster can also some of the Bank of Japan, said pressure on that, it was cutting short his upcoming two-day session on Monday only.
It can with prices do little per se even if it wanted to, because the current target is only 0.05%. It has however promised to guarantee market stability.
Many expect that the Bank of Japan to try all rise in the yen, struggling to pump more liquidity into the system, and for the Government. A strong yen would add to the economic difficulties of the export-oriented Japan as it struggles to recover from the disaster.
"I believe that we have reached a critical point where is the disaster so serious that BOJ liquidity mechanisms will engineer, which decreases the likelihood of forced to sell in the Treasury market," said Christian Cooper, head of the US dollar futures trading at Jefferies & co. in New York.
Even if the BOJ massive injections of liquidity required, expected an action in market on Monday, the US Treasury opens most analysts still expect to see, pressure on the US Treasuries sell, at least in the beginning.
Japan's stock market, now with global investors was such a thing as a favorite this year. The width of the TOPIX index was more than 8.5 percent in the year in mid-February before the recent pullback, and on Friday in connection with Quake sell-off.
Analysts suggested that company could suffer area losses in and around the main damage on Monday but that construction companies would get a boost.
Electronics giant Sony Corp. has suspended operations at eight plants. Nissan Motor output on all four of its domestic an assembly factories stopped and said restarting it could if it can get parts dependent on.
However, losses may be limited. Financial markets bounced back quickly after the earthquake of 1995, which devastated Kobe and caused $ 100 billion in damage.
Copyright 2011 Thomson Reuters.
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