Japan’s Nikkei 225 Rises to Two-Month High on Iron-Ore Demand
March 11, 2010, 2:20 AM ESTBy Masaki Kondo
March 11 (Bloomberg) -- Japanese stocks rose, sending the Nikkei 225 Stock Average to its highest close since Jan. 21, on speculation increased demand will boost earnings at iron-ore producers and that the nation’s economy is recovering.
Mitsui & Co., which owns a 15 percent stake in Vale SA’s major shareholder, climbed 2.7 percent after the Nikkei newspaper reported Brazil-based Vale is seeking to increase iron-ore prices. Mitsui O.S.K. Lines Ltd., Japan’s largest operator of iron-ore ships, rose 1.3 percent. Electric device retailer Yamada Denki Co. climbed 4 percent after the Nikkei said the government may lift its outlook on the nation’s economy.
“The economy is undoubtedly in the midst of mild recovery,” said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “Iron-ore producers don’t think of raising prices unless demand is very strong. That could be further evidence that the global economy is improving.”
The Nikkei 225 climbed 1 percent to 10,664.95 in Tokyo, the highest close since Jan. 21. The broader Topix index rose 0.9 percent to 930.38, with almost five times as many shares advancing as falling. The gauges briefly pared gains after a Chinese government report on rising consumer prices spurred concern the country will raise interest rates to curb inflation.
The Topix has increased 2.2 percent this week, set for a third-straight weekly gain, as a lower-than-estimated U.S. unemployment rate boosted investor confidence in a U.S. economic recovery. The average daily value of stocks traded in Tokyo dropped 17 percent this week from the 12-month mean as investors awaited the settlement of Nikkei 225 futures and options due tomorrow.
Iron Ore
Shares in the Topix trade at 1.1 times book value, the lowest level among the world’s 10 biggest markets, according to data compiled by Bloomberg.
Mitsui, Japan’s No. 2 trading house by market value, gained 2.7 percent to 1,545 yen. Itochu Corp., which holds a stake in a Brazilian iron-ore producer, climbed 2.2 percent to 780 yen. Nippon Steel Corp., the nation’s largest steelmaker, lost 1.2 percent and closest domestic rival JFE Holdings Inc. fell 1 percent.
Vale, controlled by Valepar SA, is seeking to raise contract iron-ore prices by more than 90 percent in negotiations with Japanese steelmakers, the Nikkei reported today. Vale, the world’s biggest producer of the raw material used to make steel, has proposed increasing the price for the April-June period, Nikkei said.
‘Immeasurable’ Scale
Mitsui O.S.K., Japan’s No. 2 shipping line, advanced 1.3 percent to 617 yen. Smaller rival Kawasaki Kisen Kaisha Ltd. rose 1.4 percent to 352 yen after the Nikkei said its container- ship business may have a narrower pretax loss in the year to March 2011.
“Prices for iron ore and resources are largely determined by emerging economies, especially China,” said Naoteru Teraoka, general manager at the investment management division of Tokyo- based Chuo Mitsui Asset Management Co., which oversees about $17 billion. “There will be more demand for infrastructure investment in China and its scale is immeasurable.”
At 11 a.m. Tokyo time, China’s government said the nation’s consumer prices rose 2.7 percent year-on-year in February, the highest level in 16 months. Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong, said an inflation rate approaching 3 percent or topping the target may trigger an interest-rate increase.
Retailers Climb
Yamada Denki, the nation’s largest electronics retailer, jumped 4 percent to 6,490 yen, while Aeon Co., Japan’s biggest supermarket operator, climbed 3.8 percent to 961 yen. Mitsui Fudosan Co., the country’s top property developer, rose 2.6 percent to 1,601 yen.
The Japanese government will probably upgrade its overall assessment of the nation’s economy for the first time since July as rising exports to China drove growth in production, the Nikkei said today, without identifying its source of information. Chief Cabinet Secretary Hirofumi Hirano told reporters today the government hasn’t decided whether to raise its assessment.
“Various indicators suggest Japan’s economy is steadily recovering, which supports shares of companies that depend on domestic demand,” said Hideo Arimura, a senior fund manager at Mizuho Asset Management Co., which oversees the equivalent of $36 billion.
Japan’s fourth-quarter gross domestic product rose at an annualized 3.8 percent, the Cabinet Office said today. That was slower than the 4.6 percent reported in preliminary figures last month.
--With assistance from Satoshi Kawano in Tokyo and Li Yanping in Beijing. Editor: Sam Waite, Alex Devine.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Nicolas Johnson at nicojohnson@bloomberg.net.
