Bloomberg News

Nikkei 225 Falls Most in Three Months on Europe Debt Crisis

June 16, 2011

June 16 (Bloomberg) -- Japan’s Nikkei 225 Stock Average fell by the most in three months as the euro weakened against the yen on mounting concern Greece will default on its debt and after reports showed the U.S. economy is cooling.

Toyota Motor Corp., the world’s largest carmaker, lost 1.7 percent. Mitsubishi Corp., Japan’s biggest commodities trader, retreated 2.8 percent after crude and metal prices dropped. Mitsui Fudosan Co., Japan’s largest developer by sales, slumped 3.6 percent after the supply of new condominiums offered in Tokyo rose less-than-expected following March’s earthquake.

The Nikkei 225 fell 1.7 percent to 9,411.28 at the 3 p.m. close in Tokyo, the most since March 15, after rioting against austerity measures in Greece threatened the country’s government and fueled speculation that budget cuts needed to qualify for international aid will be put in jeopardy. The broader Topix index declined 1.5 percent to 812.41.

“Investors have no choice but to take a wait-and-see stance on buying new risk assets,” said Kiyoshi Ishigane, a senior strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $84 billion. “There’s concern Greece’s debt problem will eventually damage the global financial system and the U.S. economy is slowing.”

Quake, Tsunami

The Topix has tumbled 13 percent since March 10, the day before a magnitude-9 earthquake and tsunami devastated Japan’s northeast coast, triggering the worst nuclear accident in 25 years, disrupting supply chains, and leaving almost 24,000 people dead or missing.

Markets across Asia fell today amid concern a Greek default will cause a freeze in credit markets worldwide, similar to the one in 2008 when Lehman Brothers Holdings Inc. collapsed. The MSCI Asia Pacific Index, the region’s key index, fell 2.2 percent, headed for its lowest close since March 18.

Greek Prime Minister George Papandreou last night sought to reassert his authority in a televised address after police used tear gas to break up protests in central Athens. Papandreou will name a new government today and call a vote of confidence in parliament as he seeks to pressure opposition lawmakers to back an austerity plan aimed at securing a new bailout.

“Greece could have a contagion effect,” European Central Bank Vice President Vitor Constancio said at a briefing in Frankfurt yesterday, presenting the bank’s semi-annual Financial Stability Review. “That’s the reason why we are against any sort of default with haircuts and any form of private-sector event that could lead to a credit event or a rating event.”

Debt Clash

European officials have so far failed to agree on a rescue plan for Greece. The ECB and the German government have clashed over how much investors should contribute to alleviating Greece’s debt load, which reached 143 percent of gross domestic product in 2010.

The yen appreciated to 113.95 against the euro today, a level not seen since May 23, from 116.04 at the close of stock trading in Tokyo yesterday. A stronger yen reduces the value of repatriated sales for Japanese exporters.

Toyota declined 1.7 percent to 3,195 yen. Advantest Corp., the No. 1 maker of chip-testing equipment, fell 2.2 percent to 1,411 yen. Canon Inc., a camera maker that gets more than 80 percent of its revenue outside Japan, dropped 1.8 percent to 3,740 yen.

In the U.S., a report showed manufacturing in the New York region unexpectedly shrank in June, a sign industry still faces parts shortages following Japan’s earthquake disaster. Another report showed confidence among U.S. homebuilders slumped this month to the lowest level since September.

Commodities Fall

Oil and raw-material related shares dropped after crude and metal prices fell. Mitsubishi retreated 2.8 percent to 1,936 yen. Mitsui & Co., Japan’s second-largest trading company, slumped 3.5 percent to 1,283 yen, while Inpex Corp., Japan’s biggest energy exploration company, lost 3.8 percent to 565,000 yen.

Crude oil for July delivery tumbled 4.6 percent to $94.81 a barrel in New York yesterday, the lowest settlement since Feb. 22. The London Metal Exchange Index of prices for six metals, including copper and aluminum, dropped 0.8 percent.

Real estate companies dropped after a report showed that 3,914 new condominiums went on sale in greater Tokyo last month, fewer than the forecasted 5,500 units. Developers delayed listings on concern consumer confidence near a two-year low and radiation leaks from a crippled nuclear power plant 220 kilometers (135 miles) north of the capital will discourage buyers.

Mitsui Fudosan, declined 3.6 percent to 1,297 yen. Mitsubishi Estate Co., the second-biggest developer by sales, lost 2.6 percent to 1,330 yen. Sumitomo Realty & Development Co., the No. 3, dropped 2.4 percent to 1,638 yen.

“Investors are getting defensive,” said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management Co. in Tokyo. “We can’t be optimistic.”

--With assistance from Satoshi Kawano in Tokyo. Editors: Jason Clenfield, John McCluskey.

To contact the reporter on this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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