Bloomberg News

Japan Stocks Snap Six-Day Rally Ahead of U.S. Unemployment Data

September 02, 2011

Sept. 2 (Bloomberg) -- Japanese stocks fell, snapping a six-day rally, ahead of a report forecast to show the U.S. added fewer jobs in August as the recovery in the world’s largest economy slows.

Sony Corp., Japan’s No. 1 exporter of consumer electronics, slid 4.3 percent. Mizuho Financial Group Inc., the nation’s third-largest lender by market value, dropped 2.6 percent after bank shares dropped in the U.S. Mitsubishi Corp., the country’s biggest trading company, slid 1.1 percent after commodity prices declined. KDDI Corp., Japan’s No. 2 mobile-phone operator by revenue, gained 0.7 percent after its stock rating was raised to “buy” from “hold” by Deutsche Bank Ag.

The Nikkei 225 Stock Average fell 1.2 percent to 8,950.74 as of the 3 p.m. trading close in Tokyo. The broader Topix index declined 1.1 percent to 769.78. For the week, the Nikkei has risen 1.7 percent, advancing for a second week, while the Topix is also up 1.8 percent.

“As people cut their forecasts for the jobs data, it’s difficult for investors to take a position one way or the other,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc.

Incoming Japanese Prime Minister Yoshihiko Noda today picked Democratic Party of Japan lawmaker Jun Azumi as finance minister. Noda, who previously served as finance minister, takes the reins of a country beset by economic contraction, burdened by the world’s largest debt and reeling from the March earthquake and nuclear disaster.

‘Political Instability’

“It’s pleasing that Noda comes from a finance background and is showing preparedness to tackle Japan’s burgeoning debt levels,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “But political instability has been a feature of Japan for some time, and so it’s prudent to adopt a ‘wait-and-see’ approach to this change.”

The Topix has fallen 14 percent this year amid concern U.S. growth is sputtering and Europe’s debt crisis will damage the banking system, damping demand in two of Japan’s biggest export markets. The decline has cut the price of shares on the index to 0.9 times book value, near the lowest since March 2009.

Stocks also dropped after a report today showed Japanese companies unexpectedly cut capital spending by 8.2 percent in the second quarter, fanning concern the nation’s recovery from the March 11 earthquake and tsunami is stalling.

U.S. Futures

Futures on the Standard & Poor’s 500 Index fell 0.4 percent today. In New York, the index dropped 1.2 percent yesterday, snapping a four-day advance, before a Labor Department report today that may show non-farm payrolls climbed by 68,000 in August after a 117,000 increase in July, according to the median forecast of economists surveyed by Bloomberg News.

Goldman Sachs Group Inc.’s Jan Hatzius cut his forecast for the employment gain to 25,000 from 50,000. Brian Jones, an economist at Societe Generale, lowered his prediction to an increase of 9,000 from 67,000.

“The U.S. jobs data won’t point to an economic recovery even if it matches the highest estimate,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “Lower-than-expected numbers are unlikely to trigger further monetary easing immediately due to concerns about side effects. Whether the numbers go up or down, U.S. stocks are likely to drop.”

Sony, Toyota

Electric appliance makers, carmakers and banks contributed the most to the Topix’s drop. Sony slumped 4.3 percent to 1,625 yen. Toyota Motor Corp., the world’s biggest carmaker, dropped 1.6 percent to 2,711 yen. Mizuho Financial Group dropped 2.6 percent to 113 yen. Mitsubishi UFJ Financial Group Inc., Japan’s largest lender, declined 1.4 percent to 342 yen.

Mitsubishi Corp. slid 1.1 percent to 1,829 yen after the Thomson Reuters/Jefferies CRB Index of raw materials fell 0.6 percent yesterday. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum dropped 1.3 percent.

KDDI advanced 0.7 percent to 577,000 yen after Deutsche Bank set the 12-month target price for the stock at 650,000 yen. Also, Tokyo Electric Power Co. is considering selling 200 billion yen at market value of KDDI shares to the company, Jiji Press reported on its website. Tokyo Electric, the utility at the center of the worst nuclear crisis since Chernobyl, fell 0.3 percent to 386 yen.

--With assistance from Toshiro Hasegawa in Tokyo and Shani Raja in Sydney. Editor: John McCluskey.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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


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