| NEW YORK
NEW YORK Japan's massive earthquake and devastating tsunami hit commodities prices on Friday, but equity investors threw off their initial fears as they reassessed damage to the world's third-largest economy.
Early in the session markets reeled as television images revealed the destruction in Japan's north east after the country's biggest earthquake on record left at least 1,000 dead.
But some viewed the market's reaction as having gone too far too fast, and that a rebuilding of Japan could be good for a wide range of markets.
"It's generally a mistake for people to be too reactive to a natural disaster like this," said Howard Ward, a fund manager at the GAMCO Growth Fund.
Caterpillar Inc (CAT.N) and other heavy equipment makers saw their stocks rise, and gold turned higher after the U.S. dollar weakened against the euro. Copper prices steadied by the close, recovering from an earlier three-month low.
The yen soared as the magnitude 8.9 quake spurred a safety bid. The Japanese currency could rise further next week if insurers scramble to raise cash by selling foreign assets, such as U.S. government debt, a potential move bond investors also were monitoring.
The quake, the most powerful since Japan started keeping records 140 years ago, sparked at least 80 fires in coastal cities and towns, Kyodo said. Japanese nuclear power plants and oil refineries were shut and one refinery was ablaze.
Thanos Bardas, a portfolio manager at Neuberger Berman in Chicago, said the U.S. government bond market was totally confused, caught like a deer in the headlights.
"The long-term response is counterintuitive," he said. "You have this event risk that drives people into Treasuries, but on the other hand you have things that need to be rebuilt so that means maybe higher global growth and higher yields, globally."
U.S. crude dipped below $100 before paring some losses. Japan is the world's third-largest energy consumer and imports almost all its energy needs.
MSCI's all-country world index of global stocks .MIWD00000PUS fell to a five-week low but then rose 0.2 percent in late trade.
Japanese equity futures fell 3.3 percent, but some investors said shares may not suffer a deep slide because major cities and manufacturing facilities were not damaged. .T
Tsunami warnings were lifted for some densely populated Asia Pacific countries previously thought to be at risk.
The quake shut refineries and other industrial facilities in Japan, driving oil lower. North Sea Brent was poised to post a weekly loss for the first time in seven weeks, with U.S. crude on track to end down for the first week in four.
The oil market also monitored a planned day of protests in top oil exporter Saudi Arabia and the violence in Libya, where oil exports have been disrupted.
"From an oil pricing perspective, the situation in Japan is likely to result in a negative impact on crude oil prices and a positive for refined products," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
Brent crude futures for April delivery settled down $1.59 at $113.84 a barrel. U.S. crude futures for April delivery fell $1.54 to settle at $101.16 a barrel.
European shares fell to a 2011 closing low, with insurers among the hardest hit, but U.S. stocks rose, led by a 1.6 percent gain in the S&P energy index .GSPE and refining shares. Valero Energy Corp (VLO.N) was up 6.3 percent and Tesoro Corp (TSO.N) up 8.5 percent.
Wall Street was helped by a 1.0 percent rise in U.S. retail sales in February, the largest gain in four months, as shoppers stepped up purchases of autos, clothes and other goods even as they spent more for gasoline.
News that U.S. consumer sentiment fell to its lowest level in five months in early March as gas prices rose later took some of the glow off the retail sales report.
The Dow Jones industrial average .DJI closed up 59.79 points, or 0.50 percent, at 12,044.40. The Standard & Poor's 500 Index .SPX rose 9.17 points, or 0.71 percent, at 1,304.28. The Nasdaq Composite Index .IXIC added 14.59 points, or 0.54 percent, at 2,715.61.
The dollar fell 1.2 percent to 81.87 yen, its biggest one-day decline since December 3, while the yen also rallied against the euro, pound and Swiss franc.
Gold pushed higher, underpinned by the Japan quake and Mideast turmoil.
U.S. Treasury debt prices dropped on fears that Japanese insurers may need to sell bonds to pay for damages.
The benchmark 10-year U.S. Treasury note shed 10/32 in price to yield 3.40 percent.
(Reporting by Rodrigo Campos, Robert Gibbons, Karen Brettell, Emily Flitter, Steven C. Johnson, Nick Olivari and Carole Vaporean in New York; Writing by Herbert Lash)