Bloomberg News

Japanese Stocks Drop on Concern Europe Crisis Spreading to Italy

September 20, 2011

Sept. 20 (Bloomberg) -- Japanese stocks fell, driving the Nikkei 225 Stock Average down for the first time in three days, after Standard & Poor’s downgrade of Italy’s credit rating reinforced concern Europe’s debt crisis is spreading.

Sony Corp., which depends on the region for 20 percent of its sales, dropped 4.1 percent as a slide in the euro cut its earnings outlook. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by market value, declined 2.9 percent on concern Europe’s debt crisis will spill into the banking system. Tokyo Electric Power Co. plunged 8.1 percent after Kyodo News reported the utility will shelve a plan to raise power rates.

The Nikkei 225 declined 1.6 percent to 8,721.24 at the 3 p.m. close of trading in Tokyo. The broader Topix index dropped 1.7 percent to 755.04. Japan’s stock markets were closed yesterday for a public holiday, when the MSCI Asia Pacific excluding Japan Index slid 2.8 percent on concern Greece is moving closer to default.

“The market is extremely jumpy,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd. “Europe’s crisis is looking like it may spread.”

Futures on the Standard & Poor’s 500 Index fell 0.7 percent today after Italy had its sovereign debt rating cut on concern weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro-region’s second-largest debt burden. The rating was lowered to A from A+, with a negative outlook, S&P said.

Greek Bailout

The S&P 500 closed down 1 percent in New York yesterday, paring losses in the final hour of trading as Greece said discussions with European officials about the country’s bailout were productive. Prime Minister George Papandreou’s government will hold another call with its main creditors today

Losses in stocks may have been limited on speculation Federal Reserve officials will propose new measures to support the U.S. economy when the Federal Open Market Committee completes a two-day meeting tomorrow. Central bank Chairman Ben S. Bernanke said on Sept. 8 that policy makers have measures at hand and are “prepared to employ these tools as appropriate.”

“Asian investors will remain risk averse at this time, but may find short-term comfort from the news that discussions are continuing, and more so from the upcoming Fed meeting,” said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney.

Exporters Fall

The Topix has declined 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. The decline has cut the price of shares on the index to 0.91 times estimated book value, near the lowest since March 2009.

Exporters fell as the yen rose to 104.15 per euro today from 104.82 yesterday in New York. The currency touched 103.90 on Sept. 12, the strongest level since June 2001. A higher yen hurts Japan’s exporters because it cuts the value of their overseas income.

Sony dropped 4.1 percent to 1,514 yen. Toyota Motor Corp., the world’s biggest carmaker, lost 1.8 percent to 2,685 yen.

Banks dropped after shares of financial companies slid yesterday in Europe and the U.S. Mitsubishi UFJ slid 2.9 percent to 335 yen, and Sumitomo Mitsui Financial Group Inc., the country’s No. 2 lender, fell 2.8 percent to 2,121 yen.

Shipping companies declined the most among the 33 Topix industry groups after the Baltic Dry Index, a measure of shipping rates for commodities, fell 2.8 percent yesterday.

Tokyo Electric Plunges

Nippon Yusen K.K., Japan’s biggest shipping line by sales, dropped 6 percent to 219 yen. Mitsui O.S.K. Lines Ltd., the second-largest, fell 6.2 percent to 320 yen.

Tokyo Electric, operator of the stricken Fukushima Dai-Ichi nuclear power plant, plunged 8.1 percent to 308 yen after Kyodo News reported government and public criticism persuaded the utility to abandon a plan to raise electricity rates by as much as 15 percent.

Among stocks that gained, Japan Tobacco Inc., a cigarette- maker half-owned by the Japanese government, advanced 5.4 percent to 368,000 yen. The increased likelihood the government will cut its stake in the company may mean management can raise dividends, JPMorgan Chase & Co. said in a report today.

--Editors: Jason Clenfield, Nick Gentle.

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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