(Updates with analyst comment, bond prices)
* Clashes in Saudi Arabia also spur move to "safer" assets
* China inflation data suggest more policy tightening ahead
* Copper poised for heavy weekly losses on economic worries
* Japan stocks hit by quake at end of trading
* Nikkei closes at intraday and 5-week low; futures slump
By Saikat Chatterjee
HONG KONG, March 11 (Reuters) - Asian shares dropped after a
massive earthquake hit Japan, violently shaking the capital
Tokyo, darkening an already bleak mood caused by weak economic
data and unrest in Saudi Arabia.
The quake struck just before the close of Tokyo stock
trading. Japan's Nikkei average closed at an intraday
and five-week low, down 1.7 percent on the day.
Hong Kong's Hang Seng share index was down 1.8
percent, and Nikkei futures in Singapore tumbled more than 3
percent. At 0650 GMT, Nikkei June futures were down 2.8 percent
at 10,075 , though they later rebounded and investors
expected the broad fall would not be prolonged.
Japanese stocks "will probably fall on Monday, especially of
those companies that have factories in the affected areas, but
on the whole the sell-off will likely be short-lived," said
Mitsuhsige Akino, a fund manager at Ichiyoshi Investment
Management, after the market closed on Friday.
European stock index futures indicated a lower opening.
Futures for the Euro STOXX 50 , Germany's DAX
and France's CAC were down 0.7 to 0.8 percent.
The magnitude 8.9 quake shook buildings in Tokyo, causing
"many injuries" and triggered a four-metre (13-ft) tsunami, NHK
television and witnesses reported.
The yen extended losses against the dollar after the quake,
falling to 83.29 yen to the dollar compared with 82.80
before it struck.
Japanese government bond futures surged, briefly rising more
than a ful point after the quake struck, while trading in cash
bonds was suspended.
"This will certainly lead the government to compile an
emergency budget," said Yasuo Yamamoto, senior economist at
Mizuho Research Institute in Tokyo. "The government would have
to sell more bonds, but this is an emergency, so this can't be
avoided."
Brent crude held near $115 per barrel as investors
monitored developments in the Middle East. Forces loyal to
Libyan leader Muammar Gaddafi battled rebels at an oil port,
while Saudi police fired in the air to disperse protesting
Shi'ites.
Oil prices are up by a quarter this year, with most of the
gains coming since the Libyan crisis erupted.
While oil prices around this level posed no substantial
threats to the world economy or financial markets, the risk that
prices may rise to damaging levels has risen substantially,
Barclays Capital strategists said.
Chinese inflation in February remained close to 5 percent,
suggesting tighter monetary policy may be needed, adding to the
uncertainty.
Weak U.S. economic data spurred some profit taking in shares
in developed markets which have enjoyed a handsome run this
year, though some bargain buying checked losses.
.
RISK REDUCTION
Overnight, a weak Wall Street which ended down nearly 2
percent. The S&P 500 is up by a third since last July.
"It is another day of reducing risk across the portfolio. We
have had it one way for too long and with big issues hitting,
everyone is running to the exit at the same time," Chris Weston,
an institutional dealer at IG Markets said.
In credit markets, sovereign credit default swap spreads
pushed wider, reflecting the general risk aversion sentiment.
London copper futures reversed early gains after the
Japanese quake hit. Dragged by worries of high oil prices
hurting the global economy, the metal was headed for its worst
week since last June.
The yield on benchmark 10-year notes slipped to
3.36 percent, down from 3.56 percent hit earlier this month.
In currency markets, the euro stayed weak after
having suffered its biggest one-day fall against the dollar in a
month, and further losses may loom if a euro zone summit fails
to soothe market nerves on sovereign debt.
Any disappointment could heap more pressure on the single
currency, which slid to one-week lows near $1.3770 overnight. It
last traded at $1.3810.
(Additional reporting by Antoni Slodkowski and Nathan Layne in
Tokyo, Narayanan Somasundaram in Sydney and Jonathan Rogers at
IFR; Editing by Daniel Magnowski and Richard Borsuk)
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