Bloomberg News

Japanese Stocks Decline Fourth Day After Italy Debt Downgrade

October 05, 2011

Oct. 5 (Bloomberg) -- Japanese stocks fell for a fourth day, sending the Topix index to its longest losing streak in seven weeks, as a downgrade of Italy’s debt rating overshadowed signs Europe may reach a consensus on measures to shield its banks from the region’s debt crisis.

Sumitomo Mitsui Financial Group Inc., Japan’s second- biggest lender by market value, dropped 2.3 percent. Tokyo Electric Power Co., the utility at the center of the worst nuclear disaster in 25 years, led utilities lower after a report that Trade Minister Yukio Edano will review a framework for power rates. Fast Retailing Co. dropped 4 percent after JPMorgan Chase & Co. cut its rating on the operator of the Uniqlo clothing chain to “underweight.”

The Topix slid 1.4 percent to 726.25 at the 3 p.m. trading close in Tokyo, its lowest level since March 2009. The gauge has fallen 25 percent from a Feb. 21 high amid an escalating crisis in Europe and slowing U.S. economic growth. The Nikkei 225 Stock Average declined 0.9 percent to 8,382.98 today.

“No concrete measures on solving Europe’s crisis have come out,” said Hitoshi Asaoka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third-largest listed bank. “There won’t be an end to the market’s volatility until we see something that will calm the situation.”

‘Shared View’

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The index finished up 2.3 percent yesterday in New York, reversing a loss in the final 50 minutes of trading, after the Financial Times quoted Olli Rehn, European Union commissioner for economic affairs, as saying there’s an “increasingly shared view” that the region needs a coordinated approach to halt the sovereign debt crisis.

Italy’s credit rating was cut by Moody’s Investors Service after U.S. markets closed. The downgrade, the first in almost two decades, came on concern that weak economic growth will prevent Prime Minister Silvio Berlusconi’s government from reducing the region’s second-largest debt.

Moody’s lowered Italy’s rating three levels to A2 from Aa2, with a negative outlook, the New York-based company said in a statement yesterday. The action followed a cut by Standard & Poor’s on Sept. 20.

Banks were the heaviest contributor to losses on the Topix. Sumitomo Mitsui Financial Group slid 2.3 percent to 2,066 yen, and Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by market value, fell 1.8 percent to 325 yen.

Topix Target Cut

Japanese stocks also fell after Goldman Sachs Group Inc. cut its 12-month target for the Topix by 8.4% to 870 from 950, according to a report dated yesterday. Slowing global growth may weigh on earnings, the investment bank said.

Tokyo Electric led utilities lower after the Asahi newspaper quoted trade minister Edano as saying he would review the framework for Japan’s electricity prices. Japan’s largest power company plunged 12 percent to 203 yen. Kansai Electric Power Co., the No. 2 utility, dropped 4.2 percent to 1,239 yen.

Fast Retailing fell 4 percent to 13,340 yen after JPMorgan cut its rating on the stock to “underweight’ from “neutral’ and reduced the share price target to 12,800 yen from 13,300 yen. Separately, the clothier said domestic sales fell 10.7 percent last month at its Uniqlo stores open for at least 12 months.

--With assistance from Toshiro Hasegawa in Tokyo. Editors: Jason Clenfield, Jim Powell.

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

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net.


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