Bloomberg News

Nikkei 225 Heads for Biggest Gain in Two Weeks on Europe Pledge

October 10, 2011

Oct. 11 (Bloomberg) -- Japanese stocks rose for a third day, with the Nikkei 225 Stock Average headed for its biggest gain in two weeks, after German and French leaders pledged to support European banks and stem the region’s debt crisis.

Sumitomo Mitsui Financial Group Inc., Japan’s second- largest publicly traded lender, climbed 2.3 percent. Mazda Motor Corp., which gets almost 20 percent of its revenue from Europe, jumped 4.8 percent. Inpex Corp., Japan’s largest oil explorer by market value, climbed 3.2 percent after crude prices advanced.

The Nikkei 225 rose 2 percent to 8,776.16 at the 11 a.m. trading break in Tokyo, set for the biggest gain since Sept. 27. The broader Topix gained 1.9 percent to 755.87, with almost six shares rising for each that fell. Japan’s Stock markets were closed yesterday for a national holiday.

“Europe is starting to take some concrete steps toward recapitalizing its banks,” said Kiyoshi Ishigane, a senior strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $84 billion. “That’s driving a rebound in the market.”

The Topix has lost about 16 percent this year amid concern U.S. growth is sputtering and Europe’s debt crisis will damage the banking system. The decline has cut the price of shares on the index to 0.89 times estimated book value, near the lowest since March 2009.

Europe Debt

Stocks advanced in Japan today following a rally in U.S. and European stocks that drove the Standard & Poor’s 500 Index up 3.4 percent yesterday, the biggest gain since August. The Stoxx Europe 600 Index also climbed, capping its biggest four- day rally since November 2008.

Shares rose after German Chancellor Angela Merkel and French President Nicholas Sarkozy pledged at the weekend to deliver a plan to recapitalize Europe’s banks and address Greece’s sovereign-debt crisis by Nov. 3.

Sumitomo Mitsui Financial rose 2.3 percent to 2,129 yen today. Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded lender, gained 2.4 percent to 336 yen.

“There is hope that if a comprehensive European bank package is announced, the damage on the real economy will be less than currently expected,” said Belinda Allen, a senior investment analyst at Colonial First State Global Asset Management in Sydney, which oversees about $145 billion. “That would be better news for global growth and commodity demand.”

Mazda, Ricoh

Exporters to Europe advanced after the region’s shared currency appreciated to as high as 104.99 yen today in Tokyo from 102.90 at the close of stock trading on Oct. 7.

Mazda jumped 4.8 percent to 154 yen. Office-equipment maker Ricoh Co., which gets more than 20 percent of its revenue in Europe, climbed 4.6 percent to 667 yen. Nissan Motor Co., a carmaker that gets about 80 percent of its sales overseas, rose 2.6 percent to 719 yen.

Japanese shares also advanced after a U.S. jobs report last week suggested the world’s biggest economy may not be headed for recession, Mitsubishi UFJ Asset’s Ishigane said. U.S. employers added 103,000 jobs in September, compared with a median forecast of 60,000 in Bloomberg survey of economists.

“It looks like the U.S. economy isn’t going to fall back into recession so soon,” Mitsubishi UFJ Asset’s Ishigane said. “The jobs market isn’t as bad as it looked.”

Energy companies gained after oil prices advanced to the highest since Sept. 21. Inpex gained 3.2 percent to 485,500 yen and Japan Petroleum Exploration Co., the nation’s second-largest oil explorer by market value, increased 3.2 percent to 2,907 yen.

Fanuc Corp., a maker of industrial robots, contributed the most to gains on the Nikkei 225, jumping 4.6 percent to 11,480 yen. The Tokyo Stock Exchange Inc. said on Oct. 7 that the company will be added to the Topix Core 30 index after Oct. 31. Fanuc will replace Tokyo Electric Power Co., the utility at the center of worst nuclear crisis since Chernobyl.

--With assistance from and Shani Raja in Sydney. Editors: Jason Clenfield, Jim Powell.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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


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