Markets and exchange traded funds (ETFs) dropped Monday as investors continued to assess the financial impact of Friday’s devastating earthquake in Japan.

  • The Tokyo stock market plunged Monday, its first business day after an earthquake and tsunami of epic proportions laid waste to cities along Japan’s northeast coast, potentially causing tens of billions of dollars in damage. Attention was centered on Japan, and how the world’s third-largest economy is dealing with the catastrophic events of last Friday. Financially, the situation is made even more difficult by Japan’s current debt and the fact that its economic recovery slowed in the last three months of 2010. The iShares MSCI Japan Index (NYSEArca: EWJ) was down nearly 9% in morning trading.
  • Europe’s main stock markets fell Monday, hit by fallout from the earthquake in Japan. Insurers, power companies and even luxury goods groups tumbled across the German, French and British stock markets. “Naturally traders maintain a definitive eye on the situation on Japan, where the terrible consequences of both the earthquake and subsequent tsunami has left a devastating effect on infrastructure and loss of life,” said Joshua Raymond, analyst at financial spread-betting firm City Index in London. The Vanguard European ETF (NYSEArca: VGK) was down about 1% early Monday.
  • Companies with links to the nuclear industry were among the hardest hit after a second explosion at a nuclear plant that was damaged by Friday’s earthquake.  The explosion hit the No. 3 reactor at the Fukushima Daiichi plant after an earlier blast at the No. 1 reactor on Saturday. The plant’s No. 2 reactor is also reportedly suffering from a cooling-system failure. “The severe nuclear incident in Japan has put a global nuclear renaissance into question,” said Jefferies analyst Alex Barnett in a note to clients. The Market Vectors Nuclear Energy ETF (NYSEArca: NLR) is down over 13.5% this morning.
  • Oil prices are sliding as analysts gauge how much the disaster in Japan will affect world energy demand. Japan is the third-largest oil consumer. Some parts of northeastern Japan are still without electricity. Three of five major oil refineries have shut down, and authorities are still trying to stabilize a damaged nuclear plant. Analysts expect the country’s energy demand will fall in the short-term. But Japan will likely compensate for the shutdown of nuclear power plants by running other generators with oil, boosting crude imports. The United States Natural Gas ETF (NYSEArca: UNG) is up approximately 2.5% in early trading.

Gregory A. Clay contributed to this article

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