Bloomberg News

Nikkei Rises Most This Month as Greece Rescue Plan Boosts Banks

July 22, 2011

July 22 (Bloomberg) -- The Nikkei 225 Stock Average rose by the most this month as a bailout plan for Greece eased concern Europe’s debt crisis will spread, reducing uncertainty over earnings at financial companies and exporters.

Sumitomo Mitsui Financial Group Inc., Japan’s second- largest publicly traded bank, rose 3.6 percent. Canon Inc., a camera maker that gets more than 80 percent of its revenue outside Japan, climbed 1.3 percent. Terumo Corp. advanced 1.3 percent after the Nikkei newspaper said the maker of medical devices may post record first-quarter profit.

The Nikkei 225 rose 1.2 percent to 10,132.11 at the 3 p.m. close in Tokyo, the most since June 29. The broader Topix index gained 1 percent to 868.81, with about three stocks rising for each that fell. For the week, the Nikkei advanced 1.6 percent, while the Topix added 1.1 percent.

“The European Union’s plan to enhance support for Greece gives markets around the world a sense of security,” said Kiyoshi Ishigane, a senior strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $84 billion. “Strong corporate earnings in Japan and the U.S. are also supporting stocks.”

Futures on the Standard & Poor’s 500 Index gained 0.2 percent today. The index rose 1.4 percent yesterday in New York as European officials announced 159 billion euros ($230 billion) in new aid for Greece to stop the region’s debt crisis from spreading. Shares also advanced after companies from Morgan Stanley to Microsoft Inc. reported profits that beat estimates.

Rescue Fund

Euro-area leaders gave their 440 billion euro rescue fund the power to buy debt across stressed euro nations after a market rout and spiking bond yields in Italy and Spain last week sparked concern the crisis was widening.

Banks provided the biggest support to the Topix. Sumitomo Mitsui Financial Group rose 3.6 percent to 2,530 yen. Mitsubishi UFJ Financial Group Inc., the country’s largest bank by market value, jumped 3.3 percent to 407 yen.

“Confirmation there’s going to be more support for Greece eases concern about the financial system,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “It gives investors a little more tolerance for risk.”

Shares of lenders also got a boost from a Goldman Sachs Group Inc. report yesterday that said lower credit costs and increased overseas business will help Japanese banks report “firm” first-quarter earnings. The report called Mitsubishi UFJ a top pick.

Mitsubishi UFJ

The Nikkei newspaper reported today that Mitsubishi UFJ’s net income may have more than doubled to about 400 billion yen in the quarter ended June 30. Earnings were boosted by a $200 billion yen premium paid to the bank by Morgan Stanley in exchange for converting preferred shares into common stock, the report said.

The euro strengthened to the highest level against the yen since July 11 as officials drew concessions from Germany, the European Central Bank and investors for a strategy to support Greece. A weaker yen helps Japanese exporters because it increases the value of overseas sales.

Canon, which gets about 30 percent of its sales in Europe, climbed 1.3 percent to 3,785 yen. Toyota Motor Corp., the world’s biggest carmaker, gained 0.8 percent to 3,335 yen. Sony Corp., Japan’s biggest exporter of consumer electronics by sales, increased 1.1 percent to 2,100 yen.

‘Major Budget Deal’

In the U.S., the S&P 500 extended gains yesterday after the New York Times reported President Barack Obama and House Speaker John Boehner were close to a “major budget deal,” boosting optimism the government will avoid defaulting on its debt. Jay Carney, Obama’s spokesman, and Boehner responded to the story by saying there is no deal.

Shares of Japanese companies also gained on reports earnings are improving. Terumo, a maker of medical devices including infusion pumps and oxygenators, rose 1.3 percent to 4,535 yen. Operating profit probably increased 7 percent to about 17 billion yen ($216 million) in the April-June period, a record for the quarter, the Nikkei newspaper said today. Terumo reports first quarter results on July 28.

Nippon Shokubai Co. climbed 1.4 percent to 1,061 yen. The maker of ethylene oxide and acrylic acid will likely generate a 20 percent gain in operating profit in the six months through September because of sales of a polymer used in disposable diapers, the Nikkei said.

--With assistance from Toshiro Hasegawa 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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