Stocks sink further overnight on world markets

Equities on Wall Street slid again overnight, as Japan's nuclear crisis showed no signs of abating and analysts tallied up the potential economic costs of the devastation in the world's third-largest economy.

In afternoon trading, the Dow Jones Industrial Average fell 1.37 per cent, the Standard & Poor's 500 Index declined 1.29 per cent and the Nasdaq Composite Index dropped 1.17 per cent.

The Chicago Board Options Exchange volatility index, Wall Street's fear gauge, jumped 14 per cent.

"We are so fixated here on Japan, and this intraday volatility is without question here to stay as we are all quickly learning what nuclear power is. You can throw everything else out the window," Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio, told Reuters.

Japan's earthquake and escalating nuclear crisis could result in losses of up to US$200 billion, according to Reuters.

Most analysts believe the economic damage will total between 10 trillion yen (US$125 billion) and 16 trillion yen, resulting in a contraction in second quarter gross domestic product but a recovery in the latter half of 2011 as reconstruction investment boosts growth.

"The economic cost of the disaster will be large," economists at JP Morgan told Reuters. "There has been substantial loss to economic resources, and economic activity will be impeded by infrastructure damages [like power outages] in the weeks or months ahead."

Meanwhile, world leaders are reassessing the future of atomic energy because of Japan's nuclear crisis. China halted nuclear project approvals and planned safety inspections of new facilities.

On the US economic front, the news was bleak too. US home construction plunged 23 per cent to a 479,000 annual rate and building permits dropped to a record low in February, according to Commerce Department figures.

On a more positive note, the producer-price index rose 1.6 per cent last month, the most since June 2009, the Labor Department said.

In the Middle East, turmoil continued with Bahrain closing its stock exchange as clashes between security forces and anti-government protesters escalated.

In Europe, the Stoxx 600 Index shed 1.6 per cent, after rising earlier in the session.

The US dollar sank to the lowest level in 16 years against the yen.

The greenback last traded 0.8 per cent lower at 80.10 against the yen on electronic trading platform EBS. It dropped to 79.972 yen earlier in the session.

Gold rose, following yesterday's 2.3 per cent drop. Spot gold was 0.7 per cent higher at US$1,403.85 an ounce at 1435 GMT.

"If the focus ceases to be entirely on Japan, and the Middle East again gets some headlines, then the geopolitical risk levels will come back in and support gold," HSBC analyst James Steel told Reuters.

Oil climbed too. Brent for April was US$2.38 higher at US$110.90 a barrel by 12.52pm EDT, recovering from yesterday's slide to US$107.35.

US crude rose US$1.12 to US$98.30 a barrel.