Bloomberg News

Japan Stocks Rise as U.S. Growth Fuels Rally After Debt Deal

October 28, 2011

Oct. 28 (Bloomberg) -- Japanese stocks rose for a second day, driving the Nikkei 225 Stock Average to its biggest weekly gain in a year, as faster U.S. economic growth fueled investor confidence after yesterday’s breakthrough on a European debt deal.

Honda Motor Co. led gains among carmakers, rising 4.4 percent. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by market value, advanced for a second day after European leaders yesterday stuck a deal that may help avert a financial crisis. Softbank Corp. surged 8.4 percent after the mobile-phone company posted record profit.

The Nikkei 225 Stock Average climbed 1.4 percent to 9,050.47 at the close in Tokyo. For the week, the gauge gained 4.3 percent, the biggest since the period ended Nov. 5, 2010. The broader Topix index rose 1.1 percent to 771.43.

“There’s less concern about the economy and that should fuel a rebound in the market,” Kazuhiro Takahashi, a general manager at Daiwa Securities Capital Markets Co. in Tokyo. “In September there was a feeling that we might have a repeat of a Lehman Shock-like crisis but yesterday’s agreement means we don’t have to think about Greece collapsing all of a sudden or a domino of bank collapses.”

Honda rose 4.4 percent to 2,498 yen, while Toyota Motor Corp., the world’s largest automaker by market value, increased 1.9 percent to 2,632 yen.

Futures on the Standard & Poor’s 500 Index slipped 0.4 percent today. The S&P 500 index rose 3.4 percent yesterday in New York after U.S. growth accelerated to a 2.5 percent annualized rate in the third quarter, up from 1.3 percent in the previous three months. Consumer spending drove the expansion.

‘Good Growth’

“That’s a very good form of growth,” said Masaru Hamasaki, who helps oversee the equivalent of $24 billion as chief strategist at Toyota Asset Management Co. in Tokyo. “Risk appetite should rise after Europe delivered a big answer to the debt crisis that’s plagued the market for a long time. I expect stocks to be firm after jumping.”

Global stocks rallied yesterday as European leaders talked bondholders into accepting 50 percent writedowns on Greek debt and boosted their rescue fund’s capacity to 1 trillion euros ($1.4 trillion) in a crisis-fighting package intended to shield the euro area.

Mitsubishi UFJ, Nintendo

Mitsubishi UFJ and Sumitomo Mitsui Financial Group, Inc., Japan’s second-largest lender by market value, advanced 0.9 percent. Both banks gained more than 5 percent yesterday.

Softbank surged 8.4 percent to 2,655 yen after saying profit more than doubled last quarter. A sale of shares in Yahoo Inc. and demand for Apple Inc.’s iPhone boosted earnings to a quarterly record.

Nikon Corp. gained 2.6 percent to 1,757 yen after the camera-maker beat its first-half profit forecast by 39 percent. Sharp Corp., Japan’s largest producer of liquid-crystal displays, climbed 6.2 percent to 737 yen after topping its forecast for operating profit by 5 percent in the six months through September.

While Europe’s progress in solving the debt crisis has fueled a rebound in Japanese stocks, gains have been limited by the yen’s rise to a postwar high and Thailand’s flood, which have disrupted production for Japanese manufacturers including Toshiba Corp. TDK Corp. and Honda. The Nikkei 225 has risen 4 percent so far this month, while the S&P 500 has surged 14 percent and the Stoxx Europe 600 Index has advanced 10 percent.

“There’s a lot of concern about the impact of a strong yen on corporate earnings,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees more than $100 billion. “Investors are very cautious, as it doesn’t look like the yen will weaken anytime soon. I think Japanese shares may have lagged behind other markets more than they should have, but that might mean there’s some scope for catch-up later on.”

--Editor: Jason Clenfield, Jim Powell.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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


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