European shares fell to a 3-1/2 month closing low on Tuesday as investors fled risky assets amid concerns of a nuclear crisis in Japan, with further pain seen for sectors such as luxury goods which rely on Japanese demand. As much as $247 billion was wiped off the value of major European stock markets in earlier intraday trading, as money poured into safe-haven government bonds after a Japanese nuclear power plant exploded and sent low levels of radiation floating towards Tokyo.
The pan-European FTSEurofirst 300 index of top shares closed down 2.2 percent at 1,084.70 points, its lowest closing level since November 30, 2010, after recouping some hefty losses in late trading. Despite the broad sell-off she said the crisis represented a buying opportunity for stocks such as British Gas which could benefit from a boost in demand for liquefied natural gas (LNG) from Japan due to the loss of nuclear production. Wholesale gas prices rose in Britain, as damage to Japan's nuclear reactors increased the likelihood for spot LNG being diverted away from the UK to Japan.
Renewable energy companies gained interest on the back of concerns about nuclear power, with Nordex, Solarworld and Q-Cells up 16.7 to 23.3 percent. Luxury goods firms declined for the second straight session on worries over the impact of demand from major consumer Japan following the earthquake in the country, with PPR among the biggest decliners in the sector, down 5.3 percent.
Richemont shed 3.7 percent while Adidas fell 3.1 percent, against a 2.6 percent drop on the STOXX Europe 600 personal and household goods index. The fall in equities coincided with a rise in the VDAX-NEW volatility index, one of Europe's main barometers of anxiety, which surged to a near 10-month high. The higher the volatility index, based on sell- and buy-options on Frankfurt's top-30 stocks, the lower investors' appetite for risky assets such as stocks.
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