Bloomberg News

Japanese Stocks Retreat as Alcoa Profit Signals U.S. Slowdown

October 12, 2011

Oct. 12 (Bloomberg) -- Japanese stocks fell for the first time in four days after U.S. bellwether Alcoa Inc. missed analysts’ earnings estimates, signaling the world’s biggest economy is slowing.

Nintendo Co., a maker of game consoles that gets almost 40 percent of its sales from the Americas, slid 2.5 percent. Chemicals maker Showa Denko K.K. and Nikon Corp., a camera manufacturer, fell after flooding disrupted production in Thailand. Mitsui O.S.K. Lines Ltd., Japan’s second-largest shipping line by revenue, jumped 6.4 percent after cargo rates hit a 10-month high.

The Nikkei 225 Stock Average fell 0.4 percent to 8,738.90 at the 3 p.m. close in Tokyo. The gauge snapped a three-day winning streak that came as German Chancellor Angela Merkel and French President Nicholas Sarkozy pledged to contain Europe’s debt crisis. The Topix lost 0.2 percent to 753.44 today amid uncertainty about Slovakia ratifying a euro-area bailout fund.

“Investors expected that stocks would have plunged after Alcoa’s earnings and the news on Slovakia, but the market has been resilient,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “Some investors are buying back stocks.”

Debt Crisis

The Topix has tumbled 16 percent this year amid concern U.S. growth is sputtering and Europe’s debt crisis will spread to 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.

Futures on the Standard & Poor’s 500 Index were little changed after falling as much as 0.7 percent earlier today in New York. The index rose 0.1 percent yesterday, while the Dow Jones Industrial Average retreated 0.2 percent.

Alcoa, the first company of the Dow to report results for the third quarter, tumbled 4.8 percent at 5:08 p.m. after the largest U.S. smelter of aluminum reported profit that trailed analysts’ estimates as production costs increased and the pace of global demand growth slowed.

“Alcoa earnings lost momentum last quarter and that suggests the U.S. economy is also slowing down,” said Naoki Fujiwara, who helps oversee $6 billion at Shinkin Asset Management Co. in Tokyo. “That’s made investors wary.”

Thai Floods

Exporters to the U.S. declined. Nintendo dropped 2.5 percent to 11,600 yen. Olympus Corp., an optical-equipment maker that gets more than 20 percent of its revenue from North America, slid 2.1 percent to 2,373 yen.

Showa Denko led declines among Japanese companies that suspended production in Thailand because of flooding. The chemical company sank 5.1 percent to 150 yen. Nikon fell 3.5 percent to 1,780 yen, while Honda Motor Co. slumped 2.2 percent to 2,295 yen.

JS Group Corp., a housing materials maker, declined the most on the Topix, plunging 12 percent to 1,800 yen after saying it missed its forecast for net income by 22 percent in the six months ended Sept. 30, coming in at 18 billion yen ($235 million). The company said earnings were hurt by bigger-than- expected impact from Japan’s earthquake.

Japanese stock losses were limited after the nation’s August machinery orders grew at the fastest pace in a year and the Shanghai Stock Exchange Composite Index rallied, rising 2.4 percent as of the close in Tokyo amid speculation that China will boost support for the equity market after valuations dropped to record-low levels.

Chinese Sentiment

“Sentiment is picking up in Chinese markets,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “Investors bought companies and industries that largely depend on China’s market after stocks there rose.”

Shipping lines advanced the most among the 33 Topix industry groups after the Baltic Dry Index of cargo rates rose yesterday to the highest since Dec. 9. Mitsui O.S.K. soared 6.4 percent to 301 yen and Nippon Yusen K.K., Japan’s biggest shipping line by sales, gained 5.2 percent to 202 yen. Kawasaki Kisen Kaisha Ltd., the No. 3, jumped 6 percent to 159 yen.

Makers of factory equipment gained after Japan’s machinery orders rose in August at the fastest pace in a year, signaling that companies are willing to invest even as global economic growth slows and the yen stays near post-World War II highs. Makino Milling Machine Co. gained 4.5 percent to 514 yen, while Okuma Corp. climbed 2.9 percent to 528 yen.

--With assistance from Satoshi Kawano in Tokyo 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.

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


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