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Markets Reel After Massive Quake Hit Japan: Oil Falls Below $100

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A massive earthquake struck Japan overnight, triggering a huge tsunami and aftershocks that devastated the city of Sendai, about 240 miles north of Tokyo, as well as dozens of other smaller cities and villages on the coast.

Residents near a nuclear power plant in Onahama were ordered to evacuate because the plant's system was unable to cool the reactor, The AP reports. Two other nuclear plants also reported trouble, but there are no reports of a radiation leak at this time. Toyota and other manufacturers have taken factories off line and several major oil refineries were shut down by the quake and its aftermath.

Tsunami waves hit Hawaii early Friday morning and warnings have been triggered across the Pacific, from South America to Oregon.

As the death toll continues to mount, it seems petty to discuss economic matters. Still, Japan is the world's third-largest economy and the financial markets are having a dramatic reaction to this natural disaster.

Japan's Nikkei tumbled in the final 30 minutes of trading following the quake closing down 1.7%, while Hong Kong's Hang Seng shed 1.6%. Shares of insurance companies like Munich Re and Swiss Re were hard hit in European trading while oil prices fell below $100 per barrel in New York. The quake is expected to at least temporarily curb demand for crude in Asia's second-largest oil-consuming nation, Bloomberg reports.

Prices of copper and other industrial metals also fell, as did grain and soybean prices amid expectations of falling demand from Japan.

After initially falling, the yen rallied sharply vs. the dollar after the Bank of Japan pledged to provide liquidity and announced plans to hold a board meeting on March 14. Major Japanese corporations have repatriated assets in the wake of other natural disasters in the past, providing further support to the currency.

U.S. stocks fell in pre-market trading but recovered at the open, aided perhaps by the dollar's weakness.

In the accompanying video, Henry and I discuss the response from policymakers and potential economic impact with William Isaac, former FDIC chairman and current chair of Fifth Third Bancorp.

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