Bloomberg News

Japanese Stocks Drop to Lowest in Two Weeks on European Impasse

October 20, 2011

Oct. 20 (Bloomberg) -- Japanese stocks fell, with the Nikkei 225 Stock Average closing at its lowest level in two weeks, as an impasse over European bailout talks sparked concerns the global economic recovery may weaken.

Nippon Sheet Glass Co., which counts Europe as its biggest market, fell 2.3 percent. Advantest Corp., a maker of memory chip testers, declined 2.4 percent after a report showed industry orders fell. Olympus Corp. extended its slump to a fifth straight day after a shareholder urged investigation of acquisitions in 2008 by the maker of endoscopes and cameras.

The Nikkei 225 slid 1 percent to 8,682.15, the lowest since Oct. 7, at the 3 p.m. close in Tokyo. The broader Topix index fell 0.7 percent to 746.02, with about three stocks falling for each that rose. The gauge tumbled 15 percent this year amid concern the U.S. may fall into recession and that Europe’s debt crisis will spread to the banking system.

“We remain pretty nervous about Europe’s crisis because we have yet to see a concrete safety-net being established for the financial system,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “Pessimism about Europe sets the tone for the market’s sentiment.”

Futures on the Standard & Poor’s 500 Index fell 0.5 percent today. In New York, the index declined 1.3 percent yesterday as France and Germany split on the role of the European Central Bank in leveraging a rescue fund, while banks lobbied against forced recapitalizations and larger writedowns of Greek debt.

French President Nicolas Sarkozy flew to Germany to join the talks as leaders assembled in Frankfurt in an effort to narrow divisions before an Oct. 23 summit.

More Pessimistic

While German Chancellor Angela Merkel this week sought to lower expectations that the crisis effort would climax at the summit in Brussels, Group of 20 finance chiefs last week set the meeting as a deadline for action. Failure risks a global economic slump, they said.

U.S. companies grew more pessimistic about the strength of a recovery even as the world’s biggest economy continued to expand last month, according to the Federal Reserve’s Beige Book survey released yesterday.

Exporters Slump

Exporters dropped. Nippon Sheet Glass slid 2.3 percent to 167 yen. Nissan Motor Co., a carmaker that gets about 15 percent of its sales in Europe, fell 1.7 percent to 697 yen. Toyota Motor Corp., the world’s largest automaker by market value, lost 1 percent to 2,555 yen. Sony Corp., Japan’s biggest exporter of consumer electronics, declined 1.6 percent to 1,544 yen.

Makers of semiconductor equipment fell after a report showed orders declined 38 percent from a year earlier in September to 79.5 billion yen ($1 billion). Advantest slipped 2.4 percent to 857 yen. Dainippon Screen Manufacturing Co., Japan’s second-biggest supplier of chipmaking equipment by sales, dropped 2.6 percent to 553 yen. Tokyo Electron Ltd., the world’s No. 2 maker of semiconductor gear, slid 2.3 percent to 3,885 yen.

Olympus dropped 4.9 percent to 1,321 yen, extending its slump to a fifth day after Harris Associate LP, the seventh- largest shareholder, called for an independent investigation of acquisitions made in 2008. Harris sent a letter to the company’s board and the Tokyo Stock Exchange, said David Herro, chief investment officer of the U.S.-based investment firm.

‘Serious Issues’

“There are serious issues surrounding the massive destruction of stakeholder value and there needs to be accountability,” Herro said in an e-mail. “I stress stakeholders because the damage is not just to the shareholders, but the employees, suppliers and customers whom also deserve answers.”

The Tokyo-based company lost almost $4 billion of market value in the past four trading days after Michael C. Woodford was fired as president and a PricewaterhouseCoopers report that he commissioned said the company may face regulatory and legal scrutiny because of payments made to advisers in the acquisition of Gyrus Group Plc in 2008.

Showa Denko KK, a chemicals producer, led declines among Japanese companies affected by Thailand’s worst floods in 50 years. Showa Denko slumped 5.4 percent to 139 yen. TDK Corp., an electronics manufacturer which shut at least four factories in the Asian country, sank 3.8 percent to 2,713 yen. Kubota Corp., Asia’s biggest maker of farm equipment by sales, lost 2 percent to 604 yen after saying yesterday it closed three Thai plants.

Materials Makers

Raw materials producers dropped after industrial metals and crude oil futures extended losses. Sumitomo Metal Mining Co., Japan’s second-largest copper smelter, sank 3.4 percent to 1,022 yen. Mitsui & Co., which gets about 40 percent of its revenue from commodities, lost 0.7 percent to 1,093 yen. Inpex Corp., the nation’s biggest energy explorer, slid 1.4 percent to 504,000 yen.

Among stocks that rose, Tokyo Electric Power Co., the utility in the middle of the worst nuclear disaster in 25 years, surged 36 percent to 292 yen. The shares have fallen 86 percent since the March 11 earthquake and tsunami caused meltdowns at the utility’s Fukushima Dai-Ichi nuclear plant.

--Editor: John McCluskey, Jim McDonald.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net.

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


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