Bloomberg News

Japanese Stocks Slide to Lowest Since 2009 on European Crisis

September 06, 2011

Sept. 6 (Bloomberg) -- Japanese stocks fell for a third day, pushing the benchmark Nikkei 225 Stock Average to the lowest close since April 2009, as Europe’s worsening debt crisis saps demand for riskier assets.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, fell 2.7 percent after the cost of insuring against default on European sovereign and financial debt surged to records. Toshiba Corp., Japan’s largest maker of nuclear power plants, sank 5.1 percent after a newspaper said the company is in talks to buy Shaw Group’s 20 percent stake in Westinghouse Electric, a reactor builder. Kansai Electric Power Co., a nuclear-power operator, jumped 3.5 percent after Japan’s new prime minister indicated his support for atomic energy.

The Nikkei 225 Stock Average fell 2.2 percent to 8,590.57, its lowest close since April 28, 2009, as of 3 p.m. in Tokyo. The broader Topix index dropped 1.9 percent to 741.20, the lowest close since March 13, 2009.

“Europe’s situation is dire because it’s unclear if Greece will get a second round of aid,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd. “Japanese stocks are falling amid a rout in global equities, and we have yet to see the bottom.”

The Nikkei 225 has lost about 16 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. Stocks in Japan’s benchmark are valued at 14 times estimated earnings on average, compared with 11.7 times for the Standard & Poor’s 500 Index and 9.3 times for the Stoxx Europe 600 Index.

Toyota, Canon

Electric appliance makers, carmakers and banks contributed the most to the Topix’ losses. Toyota Motor Corp., the world’s biggest carmaker, dropped 1.3 percent to 2,605 yen. Canon Inc., the world’s biggest camera maker, declined 1.6 percent to 3,450 yen. Mitsubishi UFJ Financial Group fell 2.7 percent to 325 yen.

The Stoxx Europe 600 Index lost 4.1 percent to 223.45 yesterday, with all 19 industry groups falling. It has suffered its biggest two-day drop since March 2009. Standard & Poor’s 500 Index futures expiring in September retreated 2.5 percent today. U.S. stock markets were closed yesterday for the Labor Day holiday.

An election loss for German Chancellor Angela Merkel’s party and reports of a rift between Greece and the International Monetary Fund fueled concern that support for bailing out indebted European nations is waning. A senior IMF economist forecast a “hard default” for Greece by March, the Wall Street Journal said, as officials suspended a budget review and Italy backtracked on its austerity pledges.

‘Risk Aversion’

“Uncertainty in Europe and the U.S. is getting strong, as U.S. jobs data deteriorated and Europe’s debt crisis spread,” said Yumi Nishimura, an equity-market analyst at Daiwa Securities Capital Markets Co. in Tokyo. “Investors have entered a short phase of risk aversion.”

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose 18 basis points to 328 at 5 p.m. in London yesterday. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers soared 24 basis points to 270, according to JPMorgan Chase & Co. Both gauges are at all-time highs based on closing prices.

Toshiba fell 5.1 percent to 297 yen, the lowest close since April 2009. The company is in talks to purchase Shaw Group’s 20 percent stake in Westinghouse Electric, a nuclear reactor builder 77 percent owned by Toshiba, the Wall Street Journal reported on its website.

Utilities rose, with Kansai Electric jumping 3.5 percent to 1,429 yen, after Japan’s new Prime Minister, Yoshihiko Noda, in his first days in office signaled that atomic power is needed to save the economy.

--Editor: Drew Gibson

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net

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


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