Nikkei drops 7% on earthquakes woes; FTSE holds steady

Japan's stock market lost almost 7% after its first full day of trading following the earthquake and tsunami that struck the country on Friday.

However, the FTSE is holding up in early trading this morning and only fell 0.23% as investors mull the economic impact of the tragedy.

In Japan, the Nikkei 225 closed down 6.2% at 9,620 points. The stock market also saw a record 4.88bn shares traded, in a sell-off spanning all sectors.

The Bank of Japan has announced it will inject $183bn into the country's banking system to revive the markets. This cash injection is the largest single amount ever by the country's central bank and it will also make another 6.8trn yen available over the next two days.

Japan's Electric Power company was particularly badly hit, with shares losing 24%. Carmaker Nissan's shares lost 9.5%, while Toshiba, a developer of nuclear reactors, dropped 16% and Hitachi also fell 16%.

Companies across the globe have been affected by the devastation in Japan, with the cost to the insurance industry more than doubling to $35bn over the weekend as the economic impact has mounted to an estimated $150bn.

Lloyd's of London are expected to be among the worst affected names on the stock market today, while shares in specialist insurers such as Catlin, Hardy, Hiscox and Amlin are set to feel to the heat.

Commodities are also likely to be volatile over the coming days, as Japan is a significant importer of oil and raw materials, meaning spot prices could tumble as demand drops in the short-term.

However, the FTSE 100 managed to stave off huge losses at the start of the week, down 0.23%. Burberry Group lost 3.75% with Invensys down 1.85%, Centrica losing 1.51%, Standard Life down 1.43% and Fresnillo dropping 1.39%.

This morning's winners were BG Group, up 3.84%, Aggreko rising 1.71%, Xstrata up 1.59%, Rio Tinto up 1.02% and Essar Energy, up 0.95%.

In Europe, France's Cac 40 was down 0.40% while Germany's Dax was down 1.42%.

Meanwhile, US stocks initially fell after Japan's natural disasters, but recovered to end the day 0.50% at 12,044.4.