By and and and and and
with contributions from Christine Lee
 on March 14, 2011

Global stock markets fell Monday as investors started tallying up the costs of last week’s earthquake in Japan, the world’s third-largest economy.




The Nikkei 225 dropped 6.2 percent to 9,620.49 in Tokyo, where traffic in stores was light and rolling blackouts hurt commerce. The region’s retail stocks took a beating with Takashimaya slumping 10.9 percent as Isetan Mitsukoshi shed 9.5 percent, Fast Retailing dropped 6.7 percent and Shiseido lost 5.3 percent. Textiles firm Onward Holdings’ stock declined 10.4 percent.

Although investors in Hong Kong held steady, pushing the Hang Seng Index up 0.4 percent, Japan’s troubles reverberated in Europe and later the U.S. The DAX fell 1.7 percent in Frankfurt as the CAC 40 dropped 1.3 percent Paris and the FTSE 100 slipped 0.9 percent in London.

The S&P Retail Index fell 1 percent, or 5.03 points, to 503.63, as the Dow Jones Industrial Average slipped below 12,000, declining 0.4 percent, or 51.24 points, to 11,993.16.

Immediately after Friday’s tsunami, investors reasoned that the disaster would lead to a construction boom and pushed blue-chip stocks up mildly. But the sentiment shifted over the weekend as problems at some of the country’s nuclear reactors were punctuated by explosions and the release of at least some radiation.

“At this point, I think the markets are more up in the air about what’s going to happen,” said Andrew Fitzpatrick, director of investments at Hinsdale Associates. “It’s just a general feeling of uncertainty and a feeling that this needs to play out a little bit further before we can really make any kind of estimate of the impact this will have.”

Credit Suisse estimated that economic losses in the disaster area could total 14 trillion to 15 trillion yen, or $170.9 billion to $183.1 billion at current exchange.

Luxe firms in particular are expected to be among those hurt by a slowdown in the country, though many top brands have shifted their focus to China in recent years.

“Clearly, luxury goods are likely to be adversely impacted by the recent tragic events in Japan — periods of mourning and a broken infrastructure are not conducive to luxury goods spending or an increased appetite to travel,” said the Royal Bank of Scotland in a research note Monday.

RBS added that luxury sales to the Japanese consumer have been cut in half over the past five years.

But while luxury stocks like PPR, LVMH Moët Hennessy Louis Vuitton and Compagnie Financière Richemont took a beating on Monday, Luca Solca, senior analyst at Bernstein Research in Zurich, downplayed the likelihood of long-term impact.

“When we look back at what happened at the time of the Kobe earthquake, we see that the negative impact on luxury goods was not long lasting. Stocks were hit, but came back relatively quickly,” Bernstein said. “The scale of devastation is much larger this time, but Japan is much smaller as a percentage of the luxury goods market than it was back then. I therefore remain relatively optimistic, assuming no further disruption is forthcoming — especially from the nuclear power plants.”

In Tokyo, many stores shuttered once again on Monday — or reduced their operating hours — to help offset a serious power shortage in the country.

On this first weekday following Friday’s disaster, foot traffic was light in the city. Numerous train lines cut their service as rolling blackouts went into effect in the outlying areas of the city. Companies encouraged their employees to work from home as much as possible. Many retailers chose to dim their lights or turn off their neon signs to conserve electricity. Brands like Prada, Louis Vuitton, Gucci, Dior, Forever 21, Columbia Sportswear and Zara shuttered some of their locations. Many others cut back on their hours. This situation is expected to persist for at least the next couple days and possibly weeks to come.

Also of note, Japan Fashion Week organizers said they will announce Tuesday whether or not they plan to go ahead with this season’s edition, slated for next week. It has already axed the opening ceremony and closing party. Several individual brands have already canceled or postponed their shows.

“As days pass by, the massive impact [of the quake] is only beginning to be revealed. Needless to say, the fashion industry is suffering great physical and psychological damage,” organizers said.

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