On world markets fall on global growth fears

In the United States, the Dow Jones industrial average fell 1. 1pc to 11,984, while the broader S & P 500 index fell 1. 2pc and the Nasdag slid 1. 2pc.

Chinese exports slow in may as world demand has hesitated. This came a drop on the part of British industrial production in April and recent reports from United States showing an anemic recovery.

The price of oil was also fell after Saudi Arabia began to offer more oil to Asian refiners, with Brent crude in London down a $1.25 to $118.32 in afternoon trading.

"The world economy embarked on a"soft patch"and this is particularly the case for developed countries, but no one knows what the magnitude and duration will be," said Herve Goulletquer, analyst at Credit Agricole.

The uncertainty caused stock market sentiment to turn sour. In Europe, the FTSE 100 closed down 1. 5pc to 5,765, while the Germany DAX fell 1. 2pc and the CAC 40 in France fell by 1. 9pc.

In the United States, the Dow Jones industrial average fell 1. 1pc to 11,984, while the broader S & P 500 index fell 1. 2pc and the Nasdag slid 1. 2pc.

In the currencies market, the euro continued its descent of recent summits of one month after the Germany have voted for a second package of assistance for the Greece, provided that the holders of bonds share the load. It is in disagreement with the opinion of the European Central Bank who fear that any change to the Greek debt could trigger a "credit event" which, to injure other fragile economies of the euro area.

"The escalation of tensions between the Germany and of the ECB - tensions who believes that markets had been resolved - has been a key factor in undermining confidence,"said Derek Halpenny, global European research head of currency at the Bank of Tokyo-Mitsubishi UFJ.""

"For financial markets to remain stable and sustained euro must be a resolution of the German-ECB conflict", he added.

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World Bank fears Europe's crisis could set off deeper global slump than Lehman collapse

"The global economy has entered a dangerous phase. The financial system of the largest economic bloc in the world is threatened by a fiscal and financial crisis that has so far eluded policy-makers’ efforts to contain it," said the bank in its Global Economic Perspectives.

"The possibility of further escalation of the crisis in Europe cannot be ruled out. Should this happen, the ensuing global downturn is likely to be deeper and longer-lasting than the recession of 2008/2009 because countries do not have the fiscal and monetary space to stimulate the global economy. Activity is unlikely to bounce back as quickly."

"An escalation of the crisis would spare no one," said Andrew Burns, the key author. "Developing countries should hope for the best and plan for the worst. If these downside risks materialised there is not much developing countries can do to prevent it. But they can prepare for it."

The report said rich countries had used up their fiscal and monetary shock absorbers after the Lehman crisis. While some poorer states still have the means to cushion the blow, many have already pushed fiscal deficits and credit growth to the limits of safety.

"Developing countries would have much less fiscal space than in 2008 with which to react to a global slowdown. As a result, if financial conditions deteriorate, many of these countries could be forced to cut spending pro-cyclically, thereby exacerbating the cycle."

The bank said there is a risk that turmoil in Europe could interact with the delayed effects of monetary tightening in Asia and Latin America, reinforcing each other in a "downward overshooting of activity".

The bank cut its global forecast from 3.4pc to 2.5pc for 2012, warning that the eurozone has already fallen into recession and is likely to contract by 0.3pc this year. "The possibility of much worse outcomes are real," it said. If Europe’s financial system to seizes up, this could lop a further 4pc off global GDP.

"While contained for the moment, the risk of a much broader freezing up of capital markets and a global crisis similar in magnitude to the Lehman crisis remains. The willingness of markets to finance the deficits and maturing debt of high-income countries cannot be assured. Should more countries find themselves denied such financing, a much wider financial crisis that could engulf private banks and other financial institutions on both sides of the Atlantic cannot be ruled out. The world could be thrown into recession as large or even larger than that of 2008-09."

The consequences would be dire for 30-odd countries with external finance needs above 10pc of GDP. The bank advised these states to "prefinance" their needs while the credit markets are still open, reducing the risk of a sudden crunch. Commodity exporters should brace for a fall in oil and metal prices of almost a quarter.

Emerging markets have already seen a rise in average bond spreads of 117 basis points since last July. Global trade volumes contracted at an 8pc annual rate in the three months to October. Capital flows to developing countries fell to $170bn in the second half of 2011 from $309bn a year earlier.

In a veiled attack on Europe’s austerity policies the bank said "it is not yet clear whether there is an end in sight to the vicious circle whereby budget cuts to restore debt sustainability reduce growth and revenues to the detriment of debt sustainability".

The bank’s "downside scenario" involves a credit freeze in two "larger Euro Area economies". Such an event would cause a further contraction of Euroland’s GDP by 6pc over the next two years. The bank stopped short of modelling what would happen if the eurozone breaks up altogether.

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Riots in the Egypt on the global markets for rock.

Disorders of Egypt saw investors scramble gold, a hole from traditional bolt in uncertain times Photo: Reuters

In London the FTSE 100 fell 1. 4pc, as did the ACC in France, then in Wall Street, the Dow Jones has been offshore 1. 4pc despite the improvement of the economy in the last quarter of last year. The stock market in Cairo, which fell 17pc this week has been closed on Friday.

Disorders of Egypt saw investors scramble gold, uncertain times traditional bolt hole. The spot price rose 1. FP7 in New York, after the closing of $ 7 to $ 1,342 in London. Oil edged closer to $100 per barrel, with Brent climbing $2.03 at $99.42-the highest settlement since September 26, 2008.

The dollar benefited too, strengthening of the euro and pound, assisted by the American economy moving into overdrive in 3 months 2010 with an acceleration of growth that the Federal Reserve will hope feeds off itself.

The United States, the largest export market only for businesses in the UK, has seen its economy expand at an annual rate of 3 2pc in the fourth quarter, place 2 FP6 the quarter preceding, but slightly below the 5pc 3 of forecasts.

"We can comfort from the fact that many of the signs of the underlying application are strong," said Ryan Wang, an economist at HSBC.

Consumer spending leads the district with a 4 4pc place, its biggest gain since the first three months of 2006, according to the report of the Department of Commerce. That helped the economy grow by 2 9pc throughout the year, compared to a contraction of 2 FP6 in 2009.

If long-term ambition US policymakers is to reduce the dependence of economy on the consumer, their spending remains the key to the strength of recovery. Congress and the Fed will be hoped that the stimulus costs unleashed last quarter - more quantitative easing Fed cuts and Washington tax-will be the wallets of consumers as bulletproof as possible. The largest world economy still faces winds, mainly of a fragile housing market and reductions in public spending that many States push through.

However, the last three months of the year witness an encouraging performance for U.S. exports. Added net exports 3.4 percentage points to expansion in the quarter, its greatest contribution since 1980. Who did much to offset a less important role played by companies rebuilding their stocks, a process which has been the key to growth since the emergence of the economy from the recession in 2009. Companies amassed inventories at a rate of $7 MD ($ 4. 5bn) in the quarter, down $ 121 in the three months before.

"For a large part of last year the concern was that companies were not hired because consumers were spending, and they were not spending because there were no jobs, stated Michael Gapen, an economist at Barclays Capital." Hope for the policy is now that it breaks this cycle and creates a virtuous. »

Speaking at the Davos World Economic Forum, Tim Geithner, US Treasury Secretary struck a note of caution, saying that "this is not a boom." It is not an expansion that will provide a rapid decline in unemployment. »

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IMF warns markets "not persuaded" eurozone leaders can resolve the debt crisis and prevent damage to the global economy

The IMF said that despite not "support of the euro Member States and the ECB, market participants remain convinced that a lasting solution is at hand".

"It would be very expensive for the euro area but also for the economy to delay to tackle the crisis of the sovereign,"said Luc Everaert, head of the political area of the IMF European common Euro."

The IMF said that despite not "support of the euro Member States and the ECB, market participants remain convinced that a lasting solution is at hand".

He said in a staff report that the results of any political decision would be "unpredictable" and that the euro-zone needed money more private in support of the "most vulnerable" of his "still-frail banks."

The Fund has recommended that the European financial stability facility (EFSF) have increased in size and allowed to buy debt on the secondary market, as a means to mitigate the threat of contagion of the peripheral States of the euro area.

He also said the indispensable to the adoption of the much stronger economic governance of the euro area. "We need more not less Europe," said Mr. Everaert.

Markets she said Tuesday, and the fears of mounting that politicians cannot resolve the sliding equities sent eurozone debt crisis Monday. The FTSE 100 gained 0. 65pc, the Germany DAX 1. 1pc, France CAC 1. 2pc, the Spain Ibex 1pc and Italy MIB 1. 9pc.

However, traders said the rebound was lowest in the belief that the liquidation were exaggerated and the fear is that jitters on a dangerous rift in Europe, top of the criticism of the euro Thursday the advance on the Greece can trigger falls further.

The Summit should attempt to complete a second round of aid for the Greece, a value of €110bn, but nations are divided on how to structure it and comments of Angela Merkel, German Chancellor Tuesday that the Summit will not be the last step in the resolution of the debt of the Greece crisis did not help sentiment.

The the euro fell against the dollar, after she said in a joint press conference with the President of Russian Dmitry Medvedev: "additional steps will be necessary and not simply a spectacular event that fixes everything." Which takes political responsibility seriously knows that such a dramatic step will not happen. »

To solve the problems of the Greece once and for all, the euro area need to consider options to reduce its debt and increase its competitiveness, said.

"Europe is unthinkable without the euro, and therefore it is worth of effort responsible for really solve the problems in the same root", she said.

Russian President says financial woes of the euro area is not a fault of the euro, but a result he used by countries to the uneven economy.

"The main euro today is a problem that a strong and respectable currency serves the countries with very different levels of the economy, said Medvedev." "It never happened in the history of humanity."

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Global markets bouncing on the truce of Libya, the G7 intervention

Mask wearing people watch a screen displaying shares in Tokyo, which rose after that the G7 intervened to sell the yen. Photo: REUTERS

The FTSE 100 has finished the day up 0. set to 5718.13, but dropped 1. 9pc during the week. Germany the DAX edged up to 0 1pc and France CAC rose 0 FP6 with the falling yen as central banks sold the Japanese currency in the co-ordinated G7 first since 2000.

In New York, the Dow Jones rose 0 9pc closed trade in Europe and the price of oil has a strong. Brent crude, which rose above $117 per barrel earlier in the day after the United Nations, supported military action in Libya, withdraw below $114 as the Government announced an immediate halt to military operations in the country.

The United Nations Security Council adopted a resolution late Thursday approving "all necessary measures" to impose a no-fly in Libya area, protect civilian areas and pressure leader Libyan, Colonel Gaddafi to accept a cease-fire. He said he was looking to verify compliance with the resolution.

The market is "dance with the geopolitical developments which, for the moment, is sounding better than what they have in the last week," said Patrick O'Hare to Briefing.com.

The Nikkei 225, which dropped to 10 2pc this week after tumbling 16pc, in the first two days taking the comfort of the coordinated action by the G7 to big 2 FP7 countries. The increase was mirrored across stock markets in Asia.

Yoshihiko Noda, Japanese Finance Minister, said that the country had agreed with the central banks of United States, Britain and the Canada and the European Central Bank to intervene jointly in the foreign exchange market.

The Japanese currency weakened against the dollar to about 81.20 yen, that extends from a rebound to a record low of 76.25 yen struck on Thursday.

The France and the Bank of England Bank confirmed that they had sold yen Friday. The Bundesbank said they would participate but did not say if they had acted.

Some traders remain skeptical about the impact of the intervention. Speculators, such as hedge funds were keen to test the authorities resolve by buying in the rise in the yen sell-off, with the market still anticipate repatriation flows to the Japan after week last earthquake and subsequent nuclear crisis in support of the Japanese currency.

Mr. Noda told reporters that the size of the intervention will be revealed in two months. Analysts estimated that intervention could be as high as 750bn yen. Market Tokyo estimates prior to the Bank of the intervention Japan to 2 billion yen (£ 16bn) in the day, similar to its end of a day of intervention in September.

"Intervention must be concerted and aggressive... and even then, I am skeptical, said one trader in London."

The intervention surprised - most financial markets had anticipated to the Japan to act alone - underlines the threat that nations see now of Japan, of the world's third largest economy.

"They felt the need to do something together," said Masafumi Yamamoto, an analyst with Barclays Capital in Tokyo currency. "The disaster itself clearly had a very negative impact on the economy, but the movement of the yen has do worse."

The strength of the yen since the earthquake struck a week ago seems counter-intuitive, but Mr. Yamamoto of Barclays said that the Japanese currency has historically served as a haven for investors during a crisiseven one of the country.

He added that some speculators have been buying yen in the hope that Japanese insurance companies would have to liquidate foreign investment in order to yen home to help pay for the repair of the country.

To calm investors, insurance companies and most important of Japan, which are the major owners of America's debt, published yesterday strong denials that they were preparing a predatory pricing of US Treasury obligations.

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If there is a global gas GLUT, why prices rise?

Ian Marchant, Chief Executive of HSE, told the Daily Telegraph that people are confused the abundance of gas to United States with a difficult situation of supplies in Europe.

Britain still gets about one-third of its inland North Sea gas, half of the rest of Europe via pipeline and 15pc via tanker form liquid.

Operational problems with liquefied natural gas (LNG) shipped from Qatar, the flow of gas in the Middle East to Asia, where customers are willing to pay higher prices and the increase in demand following the recession, have combined to push up to UK 25pc price this year.

There is some merit in these arguments.For example, just because the world has a surplus of cheap labour, does not mean that the United Kingdom cannot be far from unskilled workers.

But the image always account for the discrepancies between how energy suppliers seem to wait longer to cut prices they do before their livestock.

Britain is well supplied with gas, according to the National Grid and is poised to take its first shipment of U.S. natural gas liquefied this week at the station of the island of grain.Tous signs are that wholesale gasoline prices should be stagnation – or even collapse.

As a result, many observers are struggling see why retail prices should also be higher now than they were during much tougher wholesale price spikes.

"There is no obvious reason why energy companies should raise retail prices this winter," said Andrew Horstead risk analyst of Utilyx. "The market is well supplied and prices increased in depressions which we have seen in March, but they remain well below historical levels for this time of year.»

While the Fed is committed to freeze prices in March, Chief Executive of another major supplier said Daily Telegraph was likely to follow British gas and of SES lead in raising invoices, arguing that the prices are one-third higher than they were in 2007.

A part of the problem by working on the reasons why rising gasoline prices at retail is the lack of transparency surrounding how vendors get their gas and the price they pay for it.

Providers argue that they buy gas coming months - perhaps up to one year on the futures market - and therefore their costs of commodities not necessarily follow spot market prices.

Consumers are therefore taken hostage by their provider effectiveness is to cover.SES would admit this week that it had been less effective predict which way would be the price of gas, leaving at a loss in its sales activities at retail for the first half of this year.

"For me, it raises questions about how HSE target their procurement strategy and presentation how they are large wider energy market", explains Mr. Horstead.

There are signs that the overabundance of gas will compel the prices lower in Europe, where the market is scheduled by opacity even more than the more liberal model of Great Britain.

Major suppliers Europe have recently been pressure increasing gas giant Gazprom and total to start offering gas contracts linked to the spots, prices that are below the 30 year contract prices coupled with price 50pc.Prix oil immediate are so low due to the overabundance of gas.

Paul Newman, head of energy at AIP, the current broker, believes that the market is at the edge of a revolution.

"Much of what we see on the European markets for natural gas is the same as what we saw in the oil market in the years 1980 and 1990," he says. "Second shock in 1979 led to contracts of fixed price/fixed-supply and led to an explosive growth in the use price market, such as the cash price references.»

Everything should be good news for UK consumers at retail, gas that Britain depends in part on supplies by channelling of the continent.

The United Kingdom remains vulnerable to shocks in the short term as the flow of pipeline limited indirect Russia across Europe and the supply disruption of the North Sea.

In General, the overabundance of gas will mean gas inférieures.Il invoices but just was still too much sign of that.RM

Rubber prices have this week reached a maximum of 30 years, causing tire manufacturers increase their prices by 15pc 10pc.

Futures on the point of guide Tokyo products index is over $ 4,661 per tonne, their most top since February 1980 and Thailand cash prices climbed to a record historique.Prévision rain is likely to aggravate a shortage of supply and Chinese inflation boosted demand in the commodity sector.

ProSpreads technical analysts: ' "the fundamental reasons for recent gains rubber are clear and obvious: increased sales of cars in China, coupled with bad weather in Southeast Asia, squeezing more supply it should be a courageous speculator to sell at this gathering." "

Copper has continued its rally hit a record in London and a maximum of 30 months in New York.

Chinese demand - that never - fueled base metal prices after that industrial production increased by 13pc one year earlier.

On the London Metal Exchange, copper for the delivery of three months reached $8,966, exceeding the previous peak set in July 2008.

However, the Commerzbank analysts noted that China is now reduce imports. ""This could put price of copper under pressure," they said.

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Facilitates global sell-off as in the Japan and Wall Street fight back

The damaged Fukushima Daiichi Central nuclear where several explosions took place. Photo: Getty

The benchmark Nikkei 225 closed 5 FP7, with the broader Topix 6 FP6 increase but London of the main shares index added just points of 0 1pc with 5,700.81 open.

Gains in Europe has been also muted DAX 30 Frankfurt 0 FP7 and Paris's CAC 40 amounting to 0 5pc.

Other Asian markets had followed Japan higher, then even if the number of victims human and economic disasters, including an escalation of the nuclear crisis, remains uncertain.

At a time given the Nikkei climbed more FP6 but fell back after the Japan suspended operations to prevent a nuclear power plant disaster down after a surge of radiation is too dangerous for the workers to remain in the installation.

Most wanted shopkeepers deals after panic selling sent the index sinking 10 FP6 the day before. The Nikkei closed at its lowest level in nearly two years on Tuesday after the fall of more than 1 600 points, or 16pc, during two days - its worst two-day sell-off since 1987.

During this time, the Central Bank has pumped cash markets of money from Tokyo for a third day.

The Bank of the Japan injected 3.5 billion yen (£ 27bn), following injections totalling 23 billion yen ($283 billion) over the last two days. Contributing to banking shares perk up, lifting Mitsubishi UFJ Financial, the largest bank in the country, 2 2pc.

Exporters of power plant of the Japan took their breath after suffering staggering losses. Toyota Motor, constructor of no. 1 in the world, increased 6 4pc, Sony shot up to 7 5pc and truck-maker Isuzu was 7 3pc higher.

Industry heavy share rose the shock of the disaster gave way to thoughts of the reconstruction. Kobe Steel rose 11 3pc and Matsu Construction increased 4 8pc.

However, investors still remain tight on a crisis of change quickly to a central nuclear crippled northeast of the Japan. Authorities were still struggling to control the situation at the plant in Fukushima Dai-ichi after a string of explosions and fires, and a burst of radiation.

"It's very early days for the calculation of any impact on the economy and the stock and bond markets," said Sarah Williams, head of Japanese equities at Threadneedle based in London, which manages approximately $65bn assets.

"Until the safety of these plants is assured, investors remain cautious."

Markets elsewhere in the region of pointe. ABN Korea of added South 1. 8pc 1,957.29 and S & P/ASX 200 the Australia increased by 0. FP7 to 4,558.20. Landmarks in New Zealand, Singapore and Taiwan were also higher.

Shanghai Composite China has 1. 1pc, and actions on the Hang Seng in Hong Kong were flat.

Markets in Indonesia and the Philippines - who rely on the Japan for a relatively large share of their export - were down. Viet Nam and the Malaysia also fell.

The nuclear crisis swept financial markets of the world Tuesday as fears grew that the disaster to the Japan could slow the global economy. The Japan is the third largest global economy, manufacturing goods of automotive computer chips and bought 10pc of U.S. exports.

However, Wall Street counter. Index Dow Jones Industrial closed just 1. 1pc - or 137.74.49 points-11, 855. 42after fall as much as 3pc at a given time. FTSE 100 Xenopus Britain also melts to terminate 1. 38pc to 5,695,28. Earlier, the blue-chips were fallen to a minimum of expense 5622.53 year, wiping about £ 32bn offshore of the value of the index.

Levels of market in London and New York had expected a rebound in Japanese stocks today, claiming that the world liquidation had been exaggerated.

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ECB prepares rate rise as global tide turns

 The ECB is the first of the big central banks to signal a rate rise to curb inflation, marking a major turning point in the global policy cycle. Photo: AFP

"We are in a posture of strong vigilance: an increase in interest rates at the next meeting is possible," said ECB president Jean-Claude Trichet, following a meeting of the governing council. The code word "vigilance" sent the euro rocketing to almost $1.40 against the dollar.

The ECB is the first of the big central banks to signal a rate rise to curb inflation, marking a major turning point in the global policy cycle.

"This is a shock," said Silvio Peruzzo from RBS. "This raises risks for the eurozone periphery through all kinds of channels. Most mortgages in Spain are on floating rates."

Santiago Carbó from Granada University said the shift was "very worrying" for Spain. "It catches us at a bad time: we haven't finished cleaning up the financial system."

Mr Trichet said the ECB aims to stop inflation psychology gaining a foothold, though he played down fears of a "series" of rate rises. As a concession, the ECB once again extended its unlimited 3-month liquidity for "addicted" Irish, Greek, and Iberian banks.

The ECB is starkly at odds with the Federal Reserve on the impact of surging oil and food prices. Fed chair Ben Bernanke said this week that inflation spill-over is likely to be "temporary and relatively modest". The Fed view is that commodity shocks drain demand in the wider economy, acting as a deflationary tax.

The ECB's task is hugely complicated by the widening North-South split and incipient wage inflation in Germany. Jörg Krämer from Commerzbank said the ECB's 1pc rate is "far too low" for booming Germany".

Dr Krämer thinks that the ECB is tilting monetary policy to help Club Med and Ireland, a view widely held in Germany and reinforced by the resignation of Bundesbank chief Axel Weber following his refusal to back ECB rescue policies.

German loss of control over EMU's monetary machinery is a neuralgic issue, threatening a unwritten contract with the German people that the euro would be as hard as the old D-Mark. Hawkish moves by the ECB at this stage may be intended to keep German opinion on board and head off an EMU political crisis.

Yet the eurozone recovery remains fragile. The M3 money supply has been contracting for two months; fiscal policy is tightening across much of EMU; and there is no deal yet on the EU bail-out fund.

Albert Edwards from Societe Generale said the ECB is repeating the error of July 2008 when it met the oil spike with a rate rise, even though the eurozone economy was too weak to cope. "China's leading indicators are already tipping over, which will have a big impact on German exports. All we need now to push the world back into the recession is an ECB rate rise."

Mr Edwards said Club Med will face a double blow from credit tightening and a stronger euro. "They are going to pull the rug away from under the feet of the eurozone. Do they want it to break apart?"

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Egypt and Tunisia usher in the new era of global food revolutions

It does not take a febrile imagination to guess what the Brotherhood’s ascendancy might mean for Israel, and for strategic stability in the Mid-East. Asia has as much to lose if this goes wrong as the West. China’s energy intensity per unit of GDP is double US levels, and triple the UK.

The surge in global food prices since the summer – since Ben Bernanke signalled a fresh dollar blitz, as it happens – is not the underlying cause of Arab revolt, any more than bad harvests in 1788 were the cause of the French Revolution.

Yet they are the trigger, and have set off a vicious circle. Vulnerable governments are scrambling to lock up world supplies of grain while they can. Algeria bought 800,000 tonnes of wheat last week, and Indonesia has ordered 800,000 tonnes of rice, both greatly exceeding their normal pace of purchases. Saudi Arabia, Libya, and Bangladesh, are trying to secure extra grain supplies.

The UN’s Food and Agriculture Organization (FAO) said its global food index has surpassed the all-time high of 2008, both in nominal and real terms. The cereals index has risen 39pc in the last year, the oil and fats index 55pc.

The FAO implored goverments to avoid panic responses that “aggravate the situation”. If you are Hosni Mubarak hanging on in Cairo’s presidential palace, do care about such niceties?

France’s Nicolas Sarkozy blames the commodity spike on hedge funds, speculators, and the derivatives market (largely in London). He vowed to use his G20 presidency to smash the racket, but then Mr Sarkozy has a penchant for witchhunts against easy targets.

The European Commission has been hunting for proof to support his claims, without success. Its draft report – to be released last Wednesday, but withdrawn under pressure from Paris – reached exactly the same conclusion as investigators from the IMF, and US and British regulators.

“There is little evidence that the price formation process on commodity markets has changed in recent years with the growing importance of derivatives markets”, it said.

As Jeff Currie from Goldman Sachs tirelessly points out, future contracts are neutral. For every trader making money by going long on wheat, sugar, pork bellies, zinc, or crude oil, there is a trader losing money on the other side. It is a paper transfer between financial players.

You have to buy and hoard the vast amounts of these bulk commodities to have much impact on the price, which is costly and difficult to do, though people do park crude on floating tankers sometimes, and Chinese firms allegedly stashed copper in warehouses last year.

But that is not what commodity index funds with $150bn are actually doing with food, base metals, and energy. Only governments have strategic petroleum and grain reserves big enough to make a difference.

The immediate cause of this food spike was the worst drought in Russia and the Black Sea region for 130 years, lasting long enough to damage winter planting as well as the summer harvest. Russia imposed an export ban on grains. This was compounded by late rains in Canada, Nina disruptions in Argentina, and a series of acreage downgrades in the US. The world’s stocks-to-use ratio for corn is nearing a 30-year low of 12.8pc, according to Rabobank.

The deeper causes are well-known: an annual rise in global population by 73m; the “exhaustion” of the Green Revolution as the gains in crop yields fade, to cite the World Bank; diet shifts in Asia as the rising middle class switch to animal-protein diets, requiring 3-5 kilos of grain feed for every kilo of meat produced; the biofuel mandates that have diverted a third of the US corn crop into ethanol for cars.

Add the loss of farmland to Asia’s urban sprawl, and the depletion of the non-renewable acquivers for irrigation of North China’s plains, and the geopolitics of global food supply starts to look neuralgic.

Can the world head off mass famine? Yes, with leadership. The regions of the ex-Soviet Union farm 30m hectares less today than in the Khrushchev era, and yields are half western levels.

There are tapped hinterlands in Brazil, and in Africa where land titles and access to credit could unleash a great leap forward. The global reservoir of unforested cropland is 445m hectares, compared to 1.5 billion in production. But the low-lying fruit has already gone, and the vast investment needed will not come soon enough to avoid a menacing shift in the terms of trade between the land and the urban poor.

We are on a thinner margin of food security, as North Africa is discovering painfully, and China understands all too well. Perhaps it is a little too early to write off farm-rich Europe and America.

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Einstein was right - honey bee collapse threatens global food security

The agri-business lender Rabobank said the numbers of US bee colonies failing to survive each winter has risen to 30pc to 35pc from an historical norm of 10pc. The rate is 20pc or higher in much of Europe, and the same pattern is emerging in Latin America and Asia.

Albert Einstein, who liked to make bold claims (often wrong), famously said that "if the bee disappeared off the surface of the globe, man would have only four years to live".

Such "apocalyptic scenarios" are overblown, said Rabobank. The staples of corn, wheat, and rice are all pollinated by wind.

However, animal pollination is essential for nuts, melons and berries, and plays varying roles in citrus fruits, apples, onions, broccoli, cabbage, sprouts, courgettes, peppers, aubergines, avocados, cucumbers, coconuts, tomatoes and broad beans, as well as coffee and cocoa.

This is the fastest growing and most valuable part of the global farm economy. Between 80pc and 90pc of pollination comes from domesticated honey bees. Moths and butterflies lack the range to penetrate large fields.

The reservoir of bees is dwindling to the point where ratios are dangerously out of kilter, with the US reaching the "most extreme" imbalance. Pollinated crop output has quadrupled since 1961, yet bee colonies have halved. The bee-per-hectare count has fallen nearly 90pc.

"Farmers have managed to produce with relatively fewer bee colonies up to this point, and there is no evidence of agricultural yields being affected. The question is how much further this situation can be stretched," said the report.

Rabobank said US bee colonies were shrinking even before CCD struck because cheap imports of Asian honey had undercut US hives. Note the parallel with the demise of the US rare earth metals industry, put out of business when China flooded the world with cheaper supplies in the 1990s. This is what happens when free trade is managed carelessly.

China has its own problems. Pesticides used in pear orchards wiped out bees in parts of Sichuan in the 1980s. Crops are now pollinated by hand using feather brushes, a laborious process as one bee colony can pollinate up to 300m flowers a day.

Germany, France and Italy have banned some pesticides, especially neonicotinoids (as in tobacco) that harm the memories of bees.

The British Beekeepers' Association has called for an "urgent review" of these chemicals, fearing we may lose all our bees within a decade if we are not careful. US beekeepers have made similar pleas. The US agriculture department's Bee Research Laboratory has found evidence that even low levels of these pesticides reduce the resistance of bees to fungal pathogens.

Leaked documents from the Environmental Protection Agency confirm that clothianidin used on corn seed is "highly toxic", may pose a "long-term risk" to bees, and that previous tests were flawed.

Critics alleged a cover-up: Rabobank said we should be careful not to vilify agro-industry. The world needs food and fertilizer companies to keep finding ways to raise crop yields, if we are to feed over 70m extra mouths each year, and meet the demands of Asia's diet revolution, offset water scarcity in China and India, and divert a great chunk of the US, Argentine, and EU grain harvest into bio-fuels for cars.

With pincers closing in on world food output from so many sides, we have little margin for error. Scientists are coming to the rescue. Research is honing in on the fungus Nosema, and the Varroa mite, but not fast enough.

Rabobank calls for a step-change in the global response, and in the meantime for tougher rules, so that beekeepers do not have to fight alone, starting with curbs on pesticide use during in daylight hours when bees are foraging.

Apian atrophy is a more immediate threat than global warming, and can be solved, yet has barely risen onto the policy radar screen. This is surely a misjudgment.

Einstein was not always wrong.

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Einstein was right - honey bee collapse threatens global food security

The agri-business lender Rabobank said the numbers of US bee colonies failing to survive each winter has risen to 30pc to 35pc from an historical norm of 10pc. The rate is 20pc or higher in much of Europe, and the same pattern is emerging in Latin America and Asia.

Albert Einstein, who liked to make bold claims (often wrong), famously said that "if the bee disappeared off the surface of the globe, man would have only four years to live".

Such "apocalyptic scenarios" are overblown, said Rabobank. The staples of corn, wheat, and rice are all pollinated by wind.

However, animal pollination is essential for nuts, melons and berries, and plays varying roles in citrus fruits, apples, onions, broccoli, cabbage, sprouts, courgettes, peppers, aubergines, avocados, cucumbers, coconuts, tomatoes and broad beans, as well as coffee and cocoa.

This is the fastest growing and most valuable part of the global farm economy. Between 80pc and 90pc of pollination comes from domesticated honey bees. Moths and butterflies lack the range to penetrate large fields.

The reservoir of bees is dwindling to the point where ratios are dangerously out of kilter, with the US reaching the "most extreme" imbalance. Pollinated crop output has quadrupled since 1961, yet bee colonies have halved. The bee-per-hectare count has fallen nearly 90pc.

"Farmers have managed to produce with relatively fewer bee colonies up to this point, and there is no evidence of agricultural yields being affected. The question is how much further this situation can be stretched," said the report.

Rabobank said US bee colonies were shrinking even before CCD struck because cheap imports of Asian honey had undercut US hives. Note the parallel with the demise of the US rare earth metals industry, put out of business when China flooded the world with cheaper supplies in the 1990s. This is what happens when free trade is managed carelessly.

China has its own problems. Pesticides used in pear orchards wiped out bees in parts of Sichuan in the 1980s. Crops are now pollinated by hand using feather brushes, a laborious process as one bee colony can pollinate up to 300m flowers a day.

Germany, France and Italy have banned some pesticides, especially neonicotinoids (as in tobacco) that harm the memories of bees.

The British Beekeepers' Association has called for an "urgent review" of these chemicals, fearing we may lose all our bees within a decade if we are not careful. US beekeepers have made similar pleas. The US agriculture department's Bee Research Laboratory has found evidence that even low levels of these pesticides reduce the resistance of bees to fungal pathogens.

Leaked documents from the Environmental Protection Agency confirm that clothianidin used on corn seed is "highly toxic", may pose a "long-term risk" to bees, and that previous tests were flawed.

Critics alleged a cover-up: Rabobank said we should be careful not to vilify agro-industry. The world needs food and fertilizer companies to keep finding ways to raise crop yields, if we are to feed over 70m extra mouths each year, and meet the demands of Asia's diet revolution, offset water scarcity in China and India, and divert a great chunk of the US, Argentine, and EU grain harvest into bio-fuels for cars.

With pincers closing in on world food output from so many sides, we have little margin for error. Scientists are coming to the rescue. Research is honing in on the fungus Nosema, and the Varroa mite, but not fast enough.

Rabobank calls for a step-change in the global response, and in the meantime for tougher rules, so that beekeepers do not have to fight alone, starting with curbs on pesticide use during in daylight hours when bees are foraging.

Apian atrophy is a more immediate threat than global warming, and can be solved, yet has barely risen onto the policy radar screen. This is surely a misjudgment.

Einstein was not always wrong.

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HSBC sees China and America leading global mega-boom

 In a sweeping report entitled "The World in 2050", HSBC said China at $24.6 trillion (constant 2000 dollars) and the US at $22.3 trillion will together tower over the global economy. 

Crunching everything from fertility rates to schooling levels and the rule of law, HSBC predicts that the world's economic output will triple again by 2050, provided the major states can avoid conflict - trade wars, or worse - and defeat the Malthusian threat of food and water limits. Growth will rise to 3pc on average, up from 2pc over the last decade.

In a sweeping report entitled "The World in 2050", the bank said China would snatch the top slot as expected, but only narrowly. China at $24.6 trillion (constant 2000 dollars) and the US at $22.3 trillion will together tower over the global economy in bipolar condominium - or simply the G2 - with India at $8.2 trillion far behind in third slot, and parts of Europe slithering into oblivion.

Turkey will vault past Russia, settling an Ottoman score. Egypt, Malaysia and Indonesia will all move into the top 20. Muslim societies may start to reassert an economic clout unseen since the late Caliphate. Yet Brazil may disappoint again, stalling at 7th place in 2050 as its birthrate slows sharply and bad schools exact their toll.

The surprise is how well the Anglo-Saxon states hold up under HSBC's model, which is based on the theoretical work of Harvard professor Robert Barro. America's high fertility rate (2.1) will allow it too keep adding manpower long after China's workforce has begun to contract in 2020s and as even India starts to age in the 2040s.

An eightfold jump in the per capita income of China and India will keep growth brisk despite demographic headwinds, but they will not come to close to matching US living standards. Americans will be three times richer than the Chinese in 2050.

Britain at $3.6 trillion also fares well, slipping one rank to sixth place but pulling far ahead of Italy and France, and almost displacing Germany as Europe's biggest economy. This is chiefly due to the UK's healthy fertility rate (1.9), although sceptics might question whether a birthrate inflated by the EU's highest share of unmarried teenager mothers is a good foundation for prosperity.

The low fertility of Korea (1.1), Singapore (1.2) Germany (1.3), Poland (1.3), Italy (1.4), Spain (1.4) and Russia (1.4), more or less dooms these countries to aging crises and population decline unless they open the floodgates to immigration.

Japan is already deep into this phase of atrophy, explaining why the country has had such trouble shaking off the effects of the Nikkei bust. Its total population began contracting outright since 2005. It shed a record 120,000 last year, and will shrink 37pc by 2050.

"Demography matters," said Karen Ward, the report's chief author. The "big losers" are the smaller states of Switzerland, Netherlands, Sweden, Belgium, and Austria, which will mostly drop out of the top 30. "They may struggle to maintain their influence in global policy forums," she said.

HSBC works from the assumption that mankind will avoid the energy crunch and overcome the eco-deficit, a term used to describe the world's depletion rate of non-renewable assets. It calls for $46 trillion of investments in alternative forms of energy to break out of the carbon trap, and head off a supply crisis that could derail growth.

Feeding the world may be harder. The UN expects food demand to rise 70pc by 2050, yet the yield growth of crops has slowed to 1.5pc a year from 3.2pc in the 1960s. The number of people living in areas experiencing "severe water stress" will double from a third of the world population to two thirds between 1995 and 2025. The water basins irrigating the crops of the North China plain are being exhausted at an alarming rate.

HSBC admits that it economic projections are based on a "rather rosy scenario". Yet one thing seems clear. As superpowers of world food output, the US and Canada are sitting pretty.

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Global bond rout deepens on US fiscal worries

Fedderal Reserve chairman Ben Bernanke has stated that the explicit purpose of the policy, which he calls 'credit easing', is to bring down yields Photo: Getty Images

The yield on 10-year Treasuries – the benchmark price of money worldwide and the key driver of US mortgages rates – has rocketed to 3.3pc, up 35 basis points since President Barack Obama agreed on Monday to compromise with Senate Republicans on tax cuts.

The Treasury sell-off has ricocheted through the global system, triggering bond sell-offs in Asia, Europe and Latin America. Japan's finance ministry braced as borrowing costs on seven-year debt jumped by a sixth in one trading session, while German Bunds punched through 3pc.

The White House deal with Congress will renew the Bush tax cuts for rich and poor alike for two years, as well as adding a further a 2pc cut in payroll taxes and an extension of unemployment aid.

David Bloom, currency chief at HSBC, said it is hard to disentangle whether investors are shunning bonds because they expect US stimulus to boost growth next year, or whether they are losing patience with profligacy in Washington.

"If this is all about growth, that's brilliant. But if yields are rising because people think Amirca's fiscal situation is unsustainable, then its armaggedon," he said.

"The US can get away with this only because it is the world's reserve currency. This would be totally unacceptable in any other country. We think these problems will start to crystallise for the US in the second half of 2011, once the European debt crisis has stabilised," he said.

The warnings were echoed by Li Daokui, a rate-setter for China's central bank. "The focus of the market is still in Europe, but we must be aware that the US fiscal situation is much worse than in Europe," he said.

The US tax deal adds $1 trillion of stimulus over two years, according to BNP Paribas. America's budget deficit will remain stuck near 10pc of GDP, not just in 2011 but also in 2012. This will push gross public debt to 110pc of GDP under the IMF definition, near the brink of a debt compound spiral. The contrast with fiscal tightening in Europe has become starkly evident.

Both Moody's and Fitch warned that the US must map out a credible strategy to control spending. "We have long-term concerns about the US rating outlook and they're not yet being addressed," said Stephen Hess, chief US analyst for Moody's.

Stephen Lewis, from Monument Securities, said the bond rout is a sign that Washington can no longer take global markets for granted. "We have reached the limits of tolerance for budget deficits. There is a feeling around the world that nobody in Washington is paying any attention to the implications of what they are doing, but there is a very real risk that this will backfire if it causes mortgage rates to keep going up," he said.

"At the same time we've seen a loss of confidence in Fed strategy. There is a feeling that the Fed doesn't care about inflation – in fact, wants more of it – and that is certainly not in the interest of bondholders," he said.

The standard rate for 30-year mortgages in US has moved up in tandem with Treasury yields. The rate has been creeping up ever since the US Federal Reserve first signalled plans for a fresh blast of quantitative easing, rising 85 basis points in three months.

The housing squeeze raises serious doubts about the Fed's plan to purchase a further $600bn in Treasuries over coming months, or QE2 as it is known. Fed chair Ben Bernanke stated on Sunday that the explicit purpose of the policy – which he calls "credit easing" – is to bring down yields.

"We're not printing money. What we're doing is lowering interest rates by buying Treasury securities. And by lowering interest rates, we hope to stimulate the economy to grow faster," he said.

US data on foreign holdings of Treasuries and agency bonds are published with a delay, but monthly figures show that China sold a net $24bn in September and Russia sold $10bn. The concern is that investor flight from US debt will overpower the monthly purchases of $100bn by the Fed, making it ever harder for Washington to raise the $1.4 trillion needed next year to cover the deficit.

The rise in yields risks becoming a textbook case of a central bank losing control over long-term rates. The danger is that market fears of future bond losses – whether from inflation or higher default premiums – will neutralise the stimulus, or lead to stagflation.

Tom Porcelli, from RBC Capital Markets, said the Fed rates might be nearer 4pc by now if the Fed had not acted. However, he said there was no justification for QE2 at a time when the economy is growing at more than 2pc, and core inflation – though the lowest since the 1960s – is positive at 1pc. "Nobody believes that we're slipping into deflation anymore. That phase has passed," he said.

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IMF raises spectre of civil wars as global inequalities worsen

Dominique Strauss-Kahn, the IMF's chief, said the economic rebound across the world is built on unstable foundations, with many rich nations still strapped in job slumps while the rising powers of China, India and Brazil already facing the threat of overheating. "It is not the recovery we wanted. It is a recovery beset by tensions and strain, which could even sow the seeds of the next crisis," he said.

"Global unemployment remains at record highs, with widening income inequality adding to social strains," he said, citing turmoil in North Africa as a prelude to what may happen as 400m youths join the workforce over the next decade. "We could see rising social and political instability within nations – even war," he said.

The IMF has published a paper entitled Inequality, Leverage and Crisis arguing that the extreme gap between rich and poor – with echoes of the US in the late 1920s – was an underlying cause of the Great Recession from 2008-2009.

The paper, by the Fund's modelling unit, warned of "disastrous consequences" for the world economy unless workers regain their "bargaining power" against rentiers. It suggests radical changes to the tax system and debt relief for workers.

Mr Strauss-Kahn said the toxic global imbalances that caused the financial crisis are re-emerging, naming China and Germany as the two arch-sinners that rely on export surpluses to power growth at the expense of the US and other deficit countries.

"The most important question is to deal with the recurrent problem of some countries' large external surpluses," he said, warning that failure to curb excesses will lead to global clashes and rising protectionism in trade and finance.

In a veiled warning to China and other countries holding down their currencies for commercial advantage, the IMF chief said "exchange-rate adjustment should not be resisted". Nor should capital controls be imposed to stop the inflow of funds.

The comments appear to align the IMF behind Washington in the simmering dispute over the declining dollar. China and Brazil have accused the US of covert currency warfare through quantitative easing, but the claim is slippery since the US has a huge structural trade deficit.

Mr Strauss-Kahn also hinted that parts of Asia are exceeding the safe speed limit for growth and needed to "tighten" further before inflation gets out of control. "There are risks of overheating, and even a hard landing," he said.

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Oil markets brace for Saudi 'rage' as global spare capacity wears thin

The flow of Libyan oil has so far fallen by 1m bpd. This may not sound much against global supply of 88m, but oil prices are determined by levels of spare capacity once supply tightens.

Beyond a certain point, the price spiral can kick in with explosive force until the economic damage crushes demand.

Libya's conflict has already cut spare capacity by a third. Hopes for a quick solution are fading as the country succumbs to civil war along ancient lines of tribal cleavage. A raft of new projects planned for the Sirte Basin by mid-decade will be mothballed.

Chris Skrebowski, editor of Petroleum Review, said the long-denied oil crunch is starting to bite. "We cling to the comfort blanket that spare capacity exists, but it is mostly fictional, or inoperable. If you take 2m bpd off the figure, the whole dynamic of global oil supply changes," he said.

A Wikileaks cable cited a Saudi geologist claiming that the kingdom's reserves had been overstated by 40pc. A second cable questioned whether the Saudis "any longer have the power to drive prices down for a prolonged period".

Some investors see trouble. They are buying oil options contracts for $150 and $200 a barrel with expiry dates late this year, either as a bet or as an insurance against Mid-East mayhem. Barclays Capital said the options "call skew" is more stretched now that it was during the 2008 spike.

The implication is that markets are less sure this time that the crisis will blow over quickly, perhaps because the events the last month amount a strategic rupture.

The entire political order of the Middle East has effectively disintegrated, risking of years upheaval in a region that provides 36pc of global oil supply and holds 61pc of proven reserves.

Mass protest by Bahrain's Shi'ite majority against the ruling Sunni dynasty has been a rude awakening for investors who thought oil wealth would shield the Gulf against turmoil.

"We in the West have been listening to the wrong people," said Mr Skrebowski. "We have not been talking to the young: we missed what was happening underneath."

Bahrain sits at the epicentre of the world's energy system. It is a hop to Saudi Arabia's Eastern Province, home to an equally aggrieved Shi'ite population and the kingdom's giant oil fields.

Bahrain's Al Khalifa family has sought to defuse the island's crisis since the original crack-down, when seven people died. Yet protesters have refused to drift away, digging in at the financial hub and staging rallies outside the interior ministry. Sectarian violence between Sunni and Shia has been escalating.

What happens on the tiny island is being watched with alarm across the Gulf. The "demonstration effect" has already led to Shia protests in the Saudi oil region. Saudi police have released a Shia cleric arrested last week for demanding a constitutional monarchy.

Yet the country's Wahabi clerics also warned against "sedition" and violations of Islamic law, while the interior ministry said all rallies were banned and warned that police would use "all measures to prevent any attempt to disrupt public order."

The threats aim to quash a "Day or Rage" planned by cyber-protesters for Friday, allegedy swollen to 17,000. A similar event in Syria was nipped in the bud by secret police.

The world's economic fate now hangs on the success of Wahabi repression. Any sign that the Saudis are losing their grip risks an oil shock large enough to derail the global recovery.

Nobody knows where the "inflexion point" is. Bank of America says we are already in the danger zone since energy costs as a share of global GDP have reached 8.5pc, near historic peaks.

Deutsche Bank said the outcome differs depending on whether spikes are driven by booming demand or a supply crunch. It warns that a sudden jump to $150 will abort world recovery.

Former Fed chief Alan Greenspan said economists have been "bedevilled by over the years" trying to quantity the effect of oil shocks. "We don't know fully where all the channels are. My view is that when oil prices get up to this area and start to move up even higher, you do have to start to worry."

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Wall Street tumbles as the combustible Japan global sell-off

The damaged Fukushima Daiichi Central nuclear where several explosions took place. Photo: Getty

The benchmark Nikkei 225 closed 5 FP7, with the broader Topix 6 FP6 increase but London of the main shares index added just points of 0 1pc with 5,700.81 open.

Gains in Europe has been also muted DAX 30 Frankfurt 0 FP7 and Paris's CAC 40 amounting to 0 5pc.

Other Asian markets had followed Japan higher, then even if the number of victims human and economic disasters, including an escalation of the nuclear crisis, remains uncertain.

At a time given the Nikkei climbed more FP6 but fell back after the Japan suspended operations to prevent a nuclear power plant disaster down after a surge of radiation is too dangerous for the workers to remain in the installation.

Most wanted shopkeepers deals after panic selling sent the index sinking 10 FP6 the day before. The Nikkei closed at its lowest level in nearly two years on Tuesday after the fall of more than 1 600 points, or 16pc, during two days - its worst two-day sell-off since 1987.

During this time, the Central Bank has pumped cash markets of money from Tokyo for a third day.

The Bank of the Japan injected 3.5 billion yen (£ 27bn), following injections totalling 23 billion yen ($283 billion) over the last two days. Contributing to banking shares perk up, lifting Mitsubishi UFJ Financial, the largest bank in the country, 2 2pc.

Exporters of power plant of the Japan took their breath after suffering staggering losses. Toyota Motor, constructor of no. 1 in the world, increased 6 4pc, Sony shot up to 7 5pc and truck-maker Isuzu was 7 3pc higher.

Industry heavy share rose the shock of the disaster gave way to thoughts of the reconstruction. Kobe Steel rose 11 3pc and Matsu Construction increased 4 8pc.

However, investors still remain tight on a crisis of change quickly to a central nuclear crippled northeast of the Japan. Authorities were still struggling to control the situation at the plant in Fukushima Dai-ichi after a string of explosions and fires, and a burst of radiation.

"It's very early days for the calculation of any impact on the economy and the stock and bond markets," said Sarah Williams, head of Japanese equities at Threadneedle based in London, which manages approximately $65bn assets.

"Until the safety of these plants is assured, investors remain cautious."

Markets elsewhere in the region of pointe. ABN Korea of added South 1. 8pc 1,957.29 and S & P/ASX 200 the Australia increased by 0. FP7 to 4,558.20. Landmarks in New Zealand, Singapore and Taiwan were also higher.

Shanghai Composite China has 1. 1pc, and actions on the Hang Seng in Hong Kong were flat.

Markets in Indonesia and the Philippines - who rely on the Japan for a relatively large share of their export - were down. Viet Nam and the Malaysia also fell.

The nuclear crisis swept financial markets of the world Tuesday as fears grew that the disaster to the Japan could slow the global economy. The Japan is the third largest global economy, manufacturing goods of automotive computer chips and bought 10pc of U.S. exports.

However, Wall Street counter. Index Dow Jones Industrial closed just 1. 1pc - or 137.74.49 points-11, 855. 42after fall as much as 3pc at a given time. FTSE 100 Xenopus Britain also melts to terminate 1. 38pc to 5,695,28. Earlier, the blue-chips were fallen to a minimum of expense 5622.53 year, wiping about £ 32bn offshore of the value of the index.

Levels of market in London and New York had expected a rebound in Japanese stocks today, claiming that the world liquidation had been exaggerated.

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Wall Street struggles as the combustible Japan global sell-off

The damaged Fukushima Daiichi Central nuclear where several explosions took place. Photo: Getty

The benchmark Nikkei 225 closed 5 FP7, with the broader Topix 6 FP6 increase but London of the main shares index added just points of 0 1pc with 5,700.81 open.

Gains in Europe has been also muted DAX 30 Frankfurt 0 FP7 and Paris's CAC 40 amounting to 0 5pc.

Other Asian markets had followed Japan higher, then even if the number of victims human and economic disasters, including an escalation of the nuclear crisis, remains uncertain.

At a time given the Nikkei climbed more FP6 but fell back after the Japan suspended operations to prevent a nuclear power plant disaster down after a surge of radiation is too dangerous for the workers to remain in the installation.

Most wanted shopkeepers deals after panic selling sent the index sinking 10 FP6 the day before. The Nikkei closed at its lowest level in nearly two years on Tuesday after the fall of more than 1 600 points, or 16pc, during two days - its worst two-day sell-off since 1987.

During this time, the Central Bank has pumped cash markets of money from Tokyo for a third day.

The Bank of the Japan injected 3.5 billion yen (£ 27bn), following injections totalling 23 billion yen ($283 billion) over the last two days. Contributing to banking shares perk up, lifting Mitsubishi UFJ Financial, the largest bank in the country, 2 2pc.

Exporters of power plant of the Japan took their breath after suffering staggering losses. Toyota Motor, constructor of no. 1 in the world, increased 6 4pc, Sony shot up to 7 5pc and truck-maker Isuzu was 7 3pc higher.

Industry heavy share rose the shock of the disaster gave way to thoughts of the reconstruction. Kobe Steel rose 11 3pc and Matsu Construction increased 4 8pc.

However, investors still remain tight on a crisis of change quickly to a central nuclear crippled northeast of the Japan. Authorities were still struggling to control the situation at the plant in Fukushima Dai-ichi after a string of explosions and fires, and a burst of radiation.

"It's very early days for the calculation of any impact on the economy and the stock and bond markets," said Sarah Williams, head of Japanese equities at Threadneedle based in London, which manages approximately $65bn assets.

"Until the safety of these plants is assured, investors remain cautious."

Markets elsewhere in the region of pointe. ABN Korea of added South 1. 8pc 1,957.29 and S & P/ASX 200 the Australia increased by 0. FP7 to 4,558.20. Landmarks in New Zealand, Singapore and Taiwan were also higher.

Shanghai Composite China has 1. 1pc, and actions on the Hang Seng in Hong Kong were flat.

Markets in Indonesia and the Philippines - who rely on the Japan for a relatively large share of their export - were down. Viet Nam and the Malaysia also fell.

The nuclear crisis swept financial markets of the world Tuesday as fears grew that the disaster to the Japan could slow the global economy. The Japan is the third largest global economy, manufacturing goods of automotive computer chips and bought 10pc of U.S. exports.

However, Wall Street counter. Index Dow Jones Industrial closed just 1. 1pc - or 137.74.49 points-11, 855. 42after fall as much as 3pc at a given time. FTSE 100 Xenopus Britain also melts to terminate 1. 38pc to 5,695,28. Earlier, the blue-chips were fallen to a minimum of expense 5622.53 year, wiping about £ 32bn offshore of the value of the index.

Levels of market in London and New York had expected a rebound in Japanese stocks today, claiming that the world liquidation had been exaggerated.

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Twin threats of Japan and Gulf stalk global recovery

We are discovering once again that the country is the world's top creditor by far with nearly £2 trillion of net assets overseas.

The risk is doubly dangerous when combined with the fast-escalating conflict in the Persian Gulf, where Saudi Arabia's use of troops to suppress Shi'ite dissent in Bahrain risks a showdown with Iran.

"People had thought global recovery was self-sustaining and now equity markets are starting to ask whether it might be snuffed out," said David Bloom, currency chief at HSBC.

The twin crises come as fiscal tightening in the West and credit tightening in China start to bite. US economists such as Larry Summers and Paul Krugman fear recovery has not yet reached "escape velocity", leaving it vulnerable to external shocks.

"I am afraid we are near tipping point on global recovery," said Simon Derrick from BNY Mellon. "The fact has oil has not risen despite the latest events in the Mid-East tells you a lot about growth in the second half of this year. All the inflation talk may fade away as in 2008."

HSBC said the pattern after the 1987 crash, the 1998 Asia crisis, and Lehman's collapse, was that Japanese repatriation kicked in violently with a lag of a week. The impact may be greater this time given the trauma, and power-rationing as 11 nuclear reactors are shut down.

"This overseas wealth is like a crisis fund: this is what it is for," said Mr Bloom.

The sudden snap back in capital flows vastly outweighs the global impact of lost output, though that too is significant given plant closures by Toyota and others.

HSBC said appetite for "Uridashi" bonds of countries such as Brazil, South Africa, and Australia has "collapsed", cutting off a key source of fresh funding. The bigger effect is liquidation of global assets built up during the "carry trade", when Japan's insurers, funds and famed housewives ("Mrs Watanabe") fled zero rates to chase yield abroad. These assets include UK equities, US municipal bonds and commodity funds.

This is why an earthquake in a region covering 6pc of Japan's economy – or less than 0.5pc of global output – has set off a global rout.

Other dangers abound. CreditSights said Japan's three top banks hold $1 trillion (£62bn) of local equities. These holdings are underwater once the Topix index falls much below 800, hence the worries over the 16pc drop to 767 over the past two days.

The Bank of Japan keeps a close eye on equities and the yen. It has intervened with 21 trillion yen (£168bn) of liquidity and doubled bond purchases to 10 trillion yen to boost confidence.

Hans Redeker from BNP Paribas said the "pressure point" is the $3.9 trillion portfolio of government bonds held by the banks. The fiscal strain of the earthquake comes at time when tax revenue already covers less than half the budget, public debt is 225pc of GDP, and pension funds are becoming net sellers of bonds to meet payouts to the elderly.

The Bank of Japan may have to print money lavishly if the "deflationary equilibrium" of recent years breaks down, but this risks loss of confidence in Japan's $12 trillion debt stock, worth a fifth of global GDP. The central bank must walk a tightrope.

Meanwhile, events in Bahrain at the epicentre of global crude supplies are potentially just as threatening. Shi'ite protesters have denounced the arrival of Saudi forces to prop up Bahrain's Sunni king as an "act of war". What began a month ago as a civic rally for greater freedoms has evolved into a sectarian uprising by the Shia, 70pc of the island and with mixed Arab-Iranian ancestry. Iran called the Saudi move "unnacceptable", and left doubt that a bloody crackdown will prompt a response.

The risk group Exclusive Analysis said it expects "use of heavy force against protesters" as Sunni-Shia fighting breaks out, which in turn may cause Iran to "activate proxy militia to carry out attacks on security forces".

This would create a state of latent warfare between the two Gulf superpowers, and risk setting off a Shia uprising in Saudi Arabia's eastern province, home to giant Ghawar oil field.

David Murrin from Emergent said events had become unstoppable. "You can't put this explosive Shia energy back in a box. Nor can the Saudis try to pay them off because that won't change their ideology. There is a revolution under way in a region that underpins the US economy and the dollar," he said. Markets live: follow the effects of the Japanese disaster on the global economy.

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Capital controls eyed as global currency wars escalate

Guido Mantega, the Brazilian Finance Minister, said an international currency war threatened the country's competitiveness.

Brazil, Mexico, Peru, Colombia, Korea, Taiwan, South Africa, Russia and even Poland are either intervening directly in the exchange markets to prevent their currencies rising too far, or examining what options they have to stem disruptive inflows.

Peter Attard Montalto from Nomura said quantitative easing by the US Federal Reserve and other central banks is incubating serious conflict. "It is forcing money into emerging market bond funds, and to a lesser extent equity funds. There has truly been a wall of money entering many countries," he said.

"I worry that we are on the cusp of a competitive race to the bottom as country after country feels they need to keep up."

Brazil's finance minister Guido Mantega has complained repeatedly over the past month that his country is facing a "currency war" as funds flood the local bond market to take advantage of yields of 11pc, vastly higher than anything on offer in the West.

"We're in the midst of an international currency war. This threatens us because it takes away our competitiveness. Advanced countries are seeking to devalue their currencies," he said, pointing the finger at America, Europe and Japan. He is mulling moves to tax short-term debt investments.

Goldman Sachs said net inflows have been running at annual rate of $520bn (£329bn) in Asia over the last 15 months, and $74bn in Latin America. Intervention to stop it creates all kinds of problems so the next step may be "direct capital controls", the bank warned.

Brazil's real has been one of the world's strongest currencies over the past two years, aggravating a current account deficit nearing 2.5pc of GDP. The overvalued exchange rate endangers Brazil's industry, especially companies that compete with Chinese imports. The real has appreciated to 1.7 to the dollar from 2.6 in late 2008, and by almost the same amount against China's yuan.

"Everybody is worried that global growth is fading and they are trying to use exchange rates to protect exports. Brazil has watched as the Asians intervened and feels it can't stand by," said Ian Stannard, a currency expert at BNP Paribas.

Brazil has used taxes to slow the capital inflows but the allure of super-yields and the country's status as a grain, iron ore, and commodity powerhouse have proved irresistible. It is a textbook case of the "resources curse" that can afflict commodity producers.

A $67bn share issue by Petrobras has been a fresh magnet for funds, forcing the central bank to buy an estimated $1bn of foreign bonds each day over the past two weeks. Such action is hard to "sterilise" and can it fuel inflation.

Japan has begun intervening to stop the yen appreciating to heartburn levels for Toyota, Sharp, Sony and other exporters. A strong yen risks tipping the country deeper into deflation.

Switzerland spent 80bn francs in one month to stem capital flight from the euro, only to be defeated by the force of the exchange markets, leaving its central bank nursing huge losses.

Stephen Lewis from Monument Securities said the Fed is playing a risky game toying with more QE. There are already signs of investor flight into commodities. The danger is a repeat of the spike in 2008, which was a contributory cause of the Great Recession. "Further QE at this point may prove self-defeating," he said.

Meanwhile, Dominique Strauss-Kahn, managing director of the International Monetary Fund, tried to play down the fears of a currency war, saying he did not think there was “a big risk” despite “what has been written”.

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FTSE 100, global markets rise on hopes of more stimulus

By midday, the London's benchmark index was up 41.12 points, or 0.7pc, to 5,676.88, following gains of 1.4pc on Tuesday, its highest close since late April.

Miners were the biggest support to the index as gold hit a record high and copper rose to its highest since July 2008 as the demand outlook brightened on expectations that governments would do more to stimulate the global economy.

Antofagasta, Xstrata, Anglo American and Kazakhmys added 3.6pc to 4.2pc.

The Bank of Japan unexpectedly cut interest rates on Tuesday, supporting a view that other governments will act further to bolster economic recovery.

The Nikkei rose 1.8pc overnight to 9691.43, while in lunchtime trading in Europe, France's CAC 40 and Germany's DAX were both up more than 1pc.

In London, Energy firms were also stronger with crude oil hitting its highest level in five months. Royal Dutch Shell gained 1.4pc.

In the United States, the Institute for Supply Management's index showed the pace of growth in the US services sector accelerated more quickly than forecast in September, while hiring also picked up.

German manufacturing orders rose in August by 3.4pct on the month, surpassing forecasts.

"Macro stuff like the industrials order number is giving heart to the bulls while the bears are getting squeezed," Giles Watts, head of equities at City Index, told Reutuers. "There's a feeling that the market can keep going higher at the moment."

A survey by the British Retail Consortium showed that a jump in the cost of agricultural commodities drove British shop price inflation to a five-month high in September.

Autonomy was the top faller, down 12pct after it said it expected to review its full-year internal model with a revenue reduction of around 3pc. This wiped out most of the 16pc rise seen in September.

Sainsbury was also among the top fallers, down 1.1pc, after reporting sales at the top end of forecasts.

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