Japanese Stocks Fluctuate; Real Estate Drops, Commodities Gain
March 17, 2010, 11:03 PM EDTBy Masaki Kondo
March 18 (Bloomberg) -- Japanese stocks fluctuated as real- estate developers fell for the first time in 10 days, while higher prices for oil and metals boosted commodity companies.
Mitsui Fudosan Co. and Mitsubishi Estate Co., Japan’s largest property companies, sank more than 2.5 percent after Morgan Stanley cut their investment ratings. Canon Inc., which counts Europe as its biggest market, lost 1.8 percent as a weaker euro clouded its earnings outlook. Inpex Corp., Japan’s largest oil explorer, gained 1.4 percent on speculation demand for commodities will rise as an alternative to the dollar as the U.S. Federal Reserve keeps interest rates low.
The Nikkei 225 Stock Average fell 0.2 percent to 10,823.94 at the 11 a.m. break in Tokyo. The broader Topix index was little changed at 946.71, with almost as many shares retreating as advancing.
“It has become clearer that the Fed won’t have to rush to exit monetary easing,” said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “Technically, the market is overheating, so people are enticed to lock in profit.”
Both the Nikkei 225 and Topix closed yesterday at their highest levels since Jan. 21 after the U.S. Federal Reserve pledged to maintain its benchmark interest rate near zero for an “extended period.”
The Topix index rallied 7.5 percent from a two-month low on Feb. 9 through yesterday after a lower-than-estimated increase in U.S. consumer prices eased concern the Fed would raise interest rates. The gain lifted the price of stocks in the index to 1.16 times book value, the highest level since Jan. 21, according to data compiled by Bloomberg.
Toraku Advances
The 25-day Toraku index, a measure of daily stock winners and losers in Tokyo, climbed to 129 yesterday, the highest level since June 26. A level of more than 120 suggests the market is overheating, according to Nomura Holdings Inc.
In New York, the Standard & Poor’s 500 Index climbed 0.6 percent yesterday to its highest close since September 2008. Prices paid to factories, farmers and other producers decreased 0.6 percent in February month-on-month, the Labor Department said. Economists had estimated a 0.2 percent drop.
Mitsui Fudosan fell 2.6 percent to 1,609 yen, and Mitsubishi Estate slid 2.9 percent to 1,490 yen. Real-estate companies declined the most among Topix’s 33 industry groups, following nine days of gains. They were also the heaviest drag on the index.
Morgan Stanley lowered its view on the industry to “cautious” from “in-line” and cut Mitsui Fudosan and Mitsubishi Estate to “underweight” from “equal weight.”
‘Still Challenging’
Japanese companies with at least 1 billion yen ($11 million) in capital are pessimistic about the business climate, a survey by the Cabinet Office and Finance Ministry showed today. A gauge of companies’ sentiment stood at minus 2.4 for the three months to March 31, a second straight quarter of negative readings. A number smaller than zero means pessimists outnumber optimists.
“The resilient emerging economies are supporting companies’ earnings in developed nations,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $66 billion. “The fundamentals of the domestic economy aren’t good and consumption isn’t increasing. Businesses dependent on domestic demand are still in a challenging environment.”
Euro Weakens
Canon, the world’s biggest maker of digital cameras, dropped 1.8 percent to 4,065 yen and was the heaviest single drag on the Topix. Nikon Corp., a rival that gets a fourth of its sales in Europe, lost 1.5 percent to 2,152 yen. Olympus Corp., an endoscope maker that counts Europe as its biggest export market, fell 1.5 percent to 2,854 yen.
The euro depreciated to 123.72 against the yen today from 124.86 at the 3 p.m. close of stock trading in Tokyo yesterday. A weaker euro reduces the value of European income for Japanese companies when converted into their home currency.
Inpex climbed 1.4 percent to 665,000 yen. Mitsui Mining & Smelting Co., which owns part of Pan Pacific Copper Co., Japan’s top copper smelter, rose 1.8 percent to 278 yen. Mitsui & Co., a trading house that counts commodities as its biggest source of profit, gained 1.1 percent to 1,534 yen.
The U.S. report on producer prices fueled speculation that the Fed will keep interest rates low, leading the dollar to weaken and boosting demand for commodities as alternative investments.
Crude oil for April delivery advanced 1.5 percent to $82.93 a barrel in New York yesterday, the highest settlement since Jan. 6. Copper futures for May delivery increased 1.6 percent.
“Globally, economies are improving, but markets are awash with excess liquidity. That’s the most favorable environment for stocks,” said Ichiyoshi’s Akino.
--Editors: Nicolas Johnson, John McCluskey.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.
