Eugene Hoshiko, Associated Press
A man looks at the stock price board on a steet Wednesday, March 16, 2011 in Tokyo, Japan.

LONDON — Stocks in Europe and the U.S. slid on concerns about an escalating crisis at the Fukushima nuclear plant, while the yen headed towards a post-World War II high against the dollar as Japanese investors repatriated funds.

The renewed selling in stock markets came despite an earlier rally in Japanese shares, where the benchmark Nikkei 225 closed up 5.7 percent at 9,093.72 as investors snapped up bargains after panic selling sent the index down nearly 11 percent to its lowest level in almost two years.

Another massive monetary injection from the Bank of Japan, which took the total to almost $700 billion in short-term loans, and an indication from the government that it could buy into the stock market also helped shore up the Nikkei.

The recovery in Japan's market, witnessed across all sectors, gave Asian stocks a lift, but the momentum failed to carry through to Europe and the U.S., where traders took fright at the developments in Fukushima.

Amid reports of reports of fires at the nuclear reactors and worries of a potential meltdown, investors were jittery. Trading became even more volatile after the EU energy commissioner warned of "further catastrophic events" at the Fukushima nuclear power plant in the coming hours, though his office cautioned that he did not have privileged information on the situation.

"Market sentiment seems down for the count and it's difficult to predict where a second wind will come from," said Anthony Grech, head of research at IG Index.

In Europe, the FTSE 100 index of leading British shares closed down 97.05 points, or 1.7 percent at 5,598.23 while France's CAC-40 fell 84.29 points, or 2.2 percent, to 3,696.56. Germany's DAX ended 133.82 points, or 2 percent, lower at 6,513.84.

In the U.S., the Dow Jones industrial average was down 1.4 percent at 11,699 around midday New York time while the broader Standard & Poor's 500 index fell 1.2 percent to 1,267.

In currency markets, the yen remained buoyant, partly through its widely perceived status as a safe haven in times of stress.

By late-afternoon London time, the dollar was down 1 percent at 80.20 yen, having earlier fallen to a fresh 15-year low of 79.96 yen. The dollar is now not far above its post-World War II low of 79.75 yen, achieved back in 1995 soon after the Kobe earthquake. Traders are on the lookout for any attempt by the Bank of Japan to weaken the currency.

The appreciating yen is an additional worry for Japanese policymakers as it has the potential to price already-vulnerable exporters out of the international marketplace.

Though the Bank of Japan has pumped colossal amounts of money into the money markets over the past couple of days to support liquidity, analysts said it may be tempted to buy up dollars to rein in the export-sapping rise in the currency.

"The Bank has its work cut out keeping a lid on yen strength and as such the market needs to be wary of further central bank intervention," said Michael Hewson, market analyst at CMC Markets.

Though the dollar is losing ground against the yen, it is advancing against the euro, partly because Europe's single currency often suffers in times of increased risk in markets. The euro was trading 0.4 percent lower at $1.3921.

Meanwhile, investors are also monitoring the situation in Libya as the regime of longtime leader Moammar Gadhafi escalates its fight against the rebels and heads towards the coastal town of Benghazi, which has been under rebel control for almost a month.

The mounting unrest in the tiny Gulf state of Bahrain is hardly helping either.

Uncertainty over instability in the oil-rich Middle East kept oil prices supported Wednesday following the previous day's big declines, when fears of a nuclear meltdown in Japan hit prices hard. Benchmark crude for April delivery was up $1.16 at $98.34 a barrel in electronic trading on the New York Mercantile Exchange.

Earlier in Asia, South Korea's Kospi added 1.8 percent to 1,957.97 while Hong Kong's Hang Seng rose 0.1 percent to 22,700.88. Mainland Chinese stocks rose too, with the Shanghai Composite Index gaining 1.2 percent to 2,930.80 and the Shenzhen Composite Index rising 1.1 percent to 1,307.96.


Pamela Sampson in Bangkok contributed to this report.