* Quake, tsunami rattle investors over impact on economy
* Yen rises on expectations of fund repatriation
* Long-dated U.S. bond prices fall on Japan fears
(Updates to close of European markets)
By Herbert Lash
NEW YORK, March 11 (Reuters) - Japan's massive earthquake
and devastating tsunami slammed risk assets across the world on
Friday, but the still unknown damage to the world's
third-largest economy later drove some markets higher.
Oil prices slid more than $3 a barrel at one point and
equity markets initially sold off as investors tried to assess
the impact after Japan's biggest earthquake on record hit the
country's northeast, leaving at least 1,000 dead. For details
see [].
The quake, the most powerful since Japan started keeping
records 140 years ago, sparked at least 80 fires in coastal
cities and towns, Kyodo said. Japanese nuclear power plants and
oil refineries were shut and one refinery was ablaze.
But some U.S. markets rose late in the session, with gold
rising after the dollar weakened against the euro and U.S.
stocks posted clear gains. Copper steadied by the close,
recovering from an earlier three-month low, as investors
reassessed the likely fallout.
The magnitude 8.9 quake may prompt insurance firms to sell
assets to pay claims for damages, and bond investors were
watching to see if insurers dispose of U.S. government debt to
raise cash. []
The yen advanced on expectations that Tokyo will repatriate
funds to pay for repairs whose costs were still unknown.
Thanos Bardas, a portfolio manager at Neuberger Berman in
Chicago, said the U.S. government bond market was totally
confused, caught like a deer in the headlights.
"The long-term response is counterintuitive," he said. "You
have this event risk that drives people into Treasuries, but on
the other hand you have things that need to be rebuilt so that
means maybe higher global growth and higher yields, globally."
U.S. crude <CLc1> dipped below $100 before paring some
losses. Japan is the world's third-largest energy consumer and
imports almost all its energy needs.
MSCI's all-country world index of global stocks
<.MIWD00000PUS> fell to a five-week low but then rose 0.1
percent.
"We need to think what the potential impact on the Japanese
economy from the quake will be and what the impact on the
global economy will be," said Olivier Jakob, with Petromatrix.
"That may weigh on oil demand from Japan and the oil price."
Japanese equity futures fell 3.3 percent, but some
investors said shares may not suffer too deep a slide because
major cities and manufacturing facilities were not damaged.
[]
Tsunami warnings were lifted for some densely populated
Asia Pacific countries previously thought to be at risk.
[]
The quake shut refineries and other industrial facilities
in Japan, driving oil lower. North Sea Brent was poised to post
a weekly loss for the first time in seven weeks, with U.S.
crude on track to end down for the first week in four.
The oil market also monitored a planned day of protests in
top oil exporter Saudi Arabia and the violence in Libya, where
oil exports have been disrupted.
"The earthquake is clearly risk-negative, and you have seen
continuation of selling that has been going on all week. But
there are plenty of other things to make the world unhappy,"
said Nick Moore, RBS global head of commodity and strategy.
North Sea Brent <LCOc1> fell $1.91 to $113.52 per barrel,
while U.S. light sweet crude was off $1.72 at $100.98.
European shares fell to a 2011 closing low, with insurers
among the hardest hit, but U.S. stocks rose, led by gains in
energy shares. The S&P energy index <.GSPE> was up 2.1 percent,
with refining shares among the biggest gainers. Valero Energy
Corp <VLO.N> was up 6.3 percent and Tesoro Corp <TSO.N> up 8.3
percent.
The pan-European FTSEurofirst 300 index <> of top
shares fell 0.8 percent at 1131.78.
"The Japanese earthquake has had a direct impact on the
insurers, but investors are also worried about issues like what
is going to happen with the Europe stability fund and whether
other countries could get downgraded," said Colin McLean,
managing director at SVM Asset Management in Edinburgh, which
has about 650 million sterling ($1.05 billion) under
management.
U.S. retail sales rose 1.0 percent in February, the largest
gain in four months, as shoppers stepped up purchases of autos,
clothes and other goods even as they spent more for gasoline.
[]
News that U.S. consumer sentiment fell to its lowest level
in five months in early March as gas prices rose later took
some of the glow off the retail sales report. []
The Dow Jones industrial average <> was up 55.09
points, or 0.46 percent, at 12,039.70. The Standard & Poor's
500 Index <.SPX> was up 8.81 points, or 0.68 percent, at
1,303.92. The Nasdaq Composite Index <> was up 13.86
points, or 0.51 percent, at 2,714.88.
The yen gained against the dollar <JPY=> and the euro
<EURJPY=>, buoyed by expectations repatriated funds will flow
in to pay to repair damage caused by the quake and tsunami.
[]
The yen recovered after an initial knee-jerk reaction to
sell the currency drove it to a two-week low against the
dollar. Analysts said the yen could stay choppy on near-term
worries about the impact on a shaky Japanese economy.
Gold pushed higher, underpinned by the Japan quake and
Mideast turmoil.
"You have huge global macro events happening and everybody
is focused on these events. You have had almost this perfect
storm over the past two days," said Cort Gwon, chief strategist
at HudsonView Capital Management in New York.
U.S. Treasury debt prices dropped on fears that Japanese
insurers may need to sell bonds to pay for damages.
[]
The benchmark 10-year U.S. Treasury note <US10YT=RR> shed
10/32 in price to yield 3.40 percent.
(Reporting by Rodrigo Campos, Robert Gibbons, Karen Brettell,
Emily Flitter and Carole Vaporean in New York; Writing by
Herbert Lash; Editing by Leslie Adler)
