World shares down overnight on growth worries

Stocks in Europe and on Wall Street dropped on concern that the disasters in Japan, the world's No. 3 economy, might stunt global growth.

Officials in Japan are struggling to contain a widening nuclear crisis after Friday's devastating earthquake and tsunami.

Japanese gross domestic product might drop by 1 trillion yen in 2011, or about 0.2 percentage points, Hiromichi Shirakawa, a Tokyo-based economist at Credit Suisse, said in a client note.

A slump in consumer confidence and production cuts could exacerbate the GDP drop as much as 1 percentage point, he said.

"The earthquake could have great implications on the global economic front," Andre Bakhos, director of market analytics at Lek Securities in New York, told Reuters. "If you shut down Japan, there could be a global recession."

Japanese stocks posted their biggest daily decline since October 2008 in record volume, with Nikkei index shedding 6.2 per cent and the broader TOPIX index slumping 7.5 per cent.

In afternoon trading, the Dow Jones Industrial Average shed 0.84 per cent, the Standard & Poor's 500 Index dropped 0.97 per cent and the Nasdaq Composite Index declined 0.81 per cent. Shares have pared earlier losses as the session has progressed.

"When in doubt, sell," Charles Lieberman, chief investment officer of Advisers Capital Management in Hasbrouck Heights, New Jersey, told Reuters.

The Chicago Board Options Exchange volatility index, or VIX, jumped more than 12.6 per cent.

Stocks in the nuclear industry suffered such as General Electric, which has combined nuclear ventures with Hitachi . GE dropped 4.1 per cent.

The Market Vectors uranium and nuclear energy exchange traded fund fell 13.5 per cent, while the Global X Uranium ETF plunged 18.6 per cent.

The Japan disaster would likely delay the development of new nuclear plants in the United States, Peter Sorrentino, a senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati, which holds GE shares, told Reuters.

In Europe, the Stoxx 600 Index also declined, losing 1.1 per cent. All industry groups declined today except banks.

Oil prices also weakened on expectations Japan's demand would drop, and after Saudi Arabia sent troops into Bahrain to control protests by the Shi'ite Muslim majority and opponents of the Sunni ruling family there called the move a declaration of war.

Brent crude futures for April delivery fell 54 cents to US$113.30 a barrel at 12.50pm EDT.

US crude futures for April delivery fell 90 cents to US$100.26 a barrel.

"Japan's demand is expected to be way down in the near- to medium-term.

But Saudi troops in Bahrain and fighting in Yemen and Libya bounced crude off their lows," told Phil Flynn, analyst at PFGBest Research in Chicago, Reuters.