Global stocks were set for a thumping on Tuesday, following a sharp decline in Japan's benchmark index overnight as investors take a more grim view of the economic consequences of Friday's devastating earthquake and tsunami.
U.S. stock index futures were hit hard with about 90 minutes before markets open, suggesting a sharp drop when trading begins. Futures for the Dow Jones industrial average were down 253 points or 2.1 per cent. Futures for the broader S&P 500 were down 32 points or 2.5 per cent.
General Electric Co. was down 4.8 per cent in premarket activity, while U.S. financials were also hit hard, based on their exposure to the Japanese economy. JPMorgan Chase & Co. was down 2.1 per cent. US Bancorp was down 9.6 per cent.
Japan's Nikkei 225 fell 10.6 per cent in overnight trading. In Europe, the U.K.'s FTSE 100 was down 2.2 per cent and Germany's DAX index was down 4.2 per cent in afternoon trading.
This latest downturn appears to be related mostly to the worsening situation with Japan's nuclear reactors. There were two explosions at nuclear plants on Tuesday, which appears to have released a large amount of nuclear material into the atmosphere, according to Japanese officials. The prime minister warned that there was a very high risk of more radiation leakage.
This, course, comes at a time when Japan is already trying to deal with the tremendous human toll caused by Friday's disaster, along with a near complete economic shutdown of the country, which is the world's third largest economy.
Crude oil prices reflected some of these economic concerns, tumbling below $99 (U.S.) a barrel, down about $2.60.
The volatility comes ahead of a monetary policy statement from the U.S. Federal Reserve, to be release in the afternoon. Although no one expects the Fed to raise its key interest rate, economists and investors will be paying close attention to any shift in language related to its view on inflation and employment.
David Berman