Although Japanese markets rose overnight, fresh news on the nuclear crisis later in the day helped to sink equity markets across the board in U.S. trading. The Dow sank by 242 points while the broader indexes suffered severe losses as well as the S&P 500 dropped by 2.0% and the Nasdaq sank by 1.9% in the session. Commodity markets fared much better, rebounding off of their dismal day yesterday as oil gained close to one dollar a barrel and gold rose by $5/oz. These gains came despite a continued flight to quality among global investors as the yen sank below the 80 mark and U.S. Treasury bonds continued to see their yields plummet with the ten year note declining to a yield of just 3.21%. One of the biggest winners on the day was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which soared higher by 8.3% in Wednesday’s session. Today’s gains came as traders continued to flee risky equities and embrace safe havens causing investor fear to spike to levels unseen since the financial crisis of 2008. Volume continues to be extremely high in this ETN tracking the ‘fear index’ as today’s trading approached 60 million shares, well above the daily average of 14.3 million. Trading was especially active around 11am when a European energy official, Guenther Oettinger, declared that the situation in Japan was ‘out of control‘ leading to a sharp sell-off in the markets and a spike in demand for VXX [see more charts of VXX here].
One of the biggest losers in the ETF world was the iShares MSCI Japan Index Fund (EWJ) which continued its slide, finishing the day down 3.7%. Today’s losses came despite a strong bounceback in the Nikkei overnight in which the Japanese benchmark gained more than 5.5% on the session. However, fears over widespread radiation and a full-scale nuclear meltdown helped to bring Japanese equities and EWJ back down in Wednesday’s session. The worst of the news came as the fires spread to reactors four and five in the Fukushima plant leading many to believe that the worst was yet to come for the beleaguered plant and that further radiation could leak in the coming days. This news, along with an extremely strong yen, helped to crush EWJ in Wednesday trading, putting the fund down more than 14% over the past week [see fundamentals of EWJ here].
Disclosure: No positions at time of writing.