Bloomberg News

Japanese Stocks Drop as Moody’s U.S. Debt Review Hits Dollar

July 14, 2011

July 14 (Bloomberg) -- Japanese stocks fell for the third time this week after Moody’s Investors Service said it may cut the U.S.’s credit rating, driving down the dollar against the yen and hurting the outlook for Asian exporters.

Toyota Motor Corp., which counts North America as its largest market, lost 0.7 percent. Nippon Yusen K.K., Japan’s biggest shipping line by sales, retreated 1.7 percent after cargo rates dropped. Dainippon Screen Manufacturing Co. led declines among chip-related companies after ASML Holding NV, Europe’s biggest maker of semiconductor equipment, said orders weakened.

The Nikkei 225 Stock Average fell 0.3 percent to 9,936.12 at the 3 p.m. close in Tokyo. The gauge spiked as much as 0.4 percent after the yen weakened amid speculation Japan will sell the currency to protect manufacturers. The broader Topix declined 0.4 percent to 856.88.

“If the U.S. government, facing revenue shortfalls because of the restriction on the issuance of new government bonds, increases taxes or reduces budget expenditures, a negative impact on the economy will be unavoidable,” said Naoki Fujiwara, who helps oversee $6 billion at Shinkin Asset Management Co. in Tokyo. “Exporters to the country will be damaged if consumer spending becomes stagnant.”

Japan’s March 11 natural disasters erased 25.7 trillion yen ($325 billion) of market value from the Topix, an 8 percent decline. The gauge has recovered 5.5 percent in the past month as manufacturers including Toyota said they are restoring production and amid increasing confidence Greece would avoid a default.

Debt Ceiling

Futures on the Standard & Poor’s 500 Index slid 0.2 percent today, extending a 0.3 percent decline yesterday after Moody’s put the U.S. under review for a credit-rating downgrade on concern Congress won’t raise the federal debt limit in time to prevent a missed payment. Moody’s last reviewed the Aaa rating, in place since 1917, in 1996.

U.S. stocks had earlier risen as much 1.4 percent after Federal Reserve Chairman Ben S. Bernanke told Congress the central bank is prepared to buy more government bonds if the recovery appears to be in danger of stalling. The Fed had said it wouldn’t expand Treasury purchases designed to stimulate growth by reducing borrowing costs and boosting stock prices.

‘Slow Recovery’

Japanese stocks slipped today as the focus shifted away from Bernanke’s comments toward the risk of a U.S. default and the impact of dollar weakness on exporters. Toyota, the world’s largest automaker, lost 0.7 percent to 3,340 yen. Kyocera Corp., a maker of solar panels which gets 17 percent of its revenue in the U.S., dropped 0.7 percent to 8,220 yen.

“If concerns about the U.S. increase, it’s possible the yen will appreciate further against the dollar,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. in Tokyo.

The yen touched 78.47 against the dollar today, its strongest since March 17, from 79.56 at the close of stock trading in Tokyo yesterday. A stronger yen hurts exporters because it cuts the value of their overseas sales.

Shipping companies retreated after the Baltic Dry Index, a measure of cargo rates, dropped 2 percent. Rates have fallen four days straight.

Nippon Yusen lost 1.7 percent to 295 yen. Mitsui O.S.K. Lines Ltd., Japan’s second-largest shipping line by sales, slid 1.6 percent to 420 yen. Kawasaki Kisen Kaisha Ltd., the No. 3, declined 1.1 percent to 269 yen.

Chipmaking Tools

Makers of tools and materials used to manufacture microchips declined after ASML said orders missed its own forecast last quarter and projected bookings will fall in the current period. Concern the global economy will slow “creates uncertainty, which currently reflects the hesitance of our customers,” Chief Financial Officer Peter Wennink said on the company’s website.

Dainippon Screen, a maker of equipment used to clean semiconductor wafers, slumped 4.2 percent to 645 yen, the lowest since Jan. 13. Advantest Corp., the world’s biggest manufacturer of chip-testing gear, dropped 2.6 percent to 1,473 yen. Sumco Corp., a maker of silicon wafers, retreated 2.7 percent to 1,323 yen.

Titanium, Steel

Among stocks that rose, smelter Toho Titanium Co. climbed 1.7 percent to 2,336 yen after being rated “outperform” in new coverage at Mitsubishi UFJ Morgan Stanley Securities Co. A “sharp recovery” in titanium demand should boost Toho sales, the securities firm said.

Nisshin Steel Co. and Nippon Metal Industry Co. surged after the Nikkan Sangyo newspaper said the steelmakers are in talks to merge. Nippon Metal’s Isao Fujiwara, a deputy manager in the corporate planning department, denied the report. Nisshin Steel said in a statement that “nothing has been decided.”

Nisshin Steel advanced 2 percent to 157 yen and Nippon Metal climbed 8.6 percent to 101.

--With assistance from Satoshi Kawano in Tokyo. Editors: Jason Clenfield, Jim McDonald

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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