Bloomberg News

Japan Stocks Fall Before Greek Meeting on New Leadership

November 07, 2011

Nov. 7 (Bloomberg) -- Japanese stocks fell, extending last week’s decline, before Greek leaders meet today to decide who will head a new government to secure international financing and as Italian Prime Minister Silvio Berlusconi struggles to maintain a majority ahead of a key vote.

Canon Inc., a camera maker that gets 32 percent of its sales in Europe, fell 2 percent. Furukawa Electric Co., a cable maker, plunged 12 percent after forecasting a loss. Osaka Securities Exchange Co. rallied after a report that it entered final talks to merge with Tokyo Stock Exchange Group Inc., Japan’s largest bourse.

The Nikkei 225 Stock Average fell 0.4 percent to 8,767.09 as of the 3 p.m. close of trading in Tokyo after dropping 2.8 percent last week. The broader Topix index slid 0.2 percent to 750.45. Stocks fell as Greece sought to create a new government to access financing to avert a sovereign-debt default after Greek Prime Minister George Papandreou agreed to step down.

“There’s going to be some uncertainty of what the direction of the unity government is,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “It’s an opportunity to sit back and wait for clarity in terms of how governments and investors are going to approach the European situation.”

Futures on the Standard & Poor’s 500 Index dropped 0.1 percent today. The gauge fell 0.6 percent on Nov. 4 in New York. Stocks also declined today as Berlusconi’s majority threatens to unravel ahead of a vote on a budget report as the nation’s borrowing costs soared amid the regional debt crisis.

Italian Opposition

“Opposition is mounting in Italy against Prime Minister Berlusconi, which is feeding concern that the nation can’t make much progress on rebuilding its finances,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $37 billion. “News out of Italy and Europe’s situation are weighing on stocks as well as bad earnings.”

Greece’s Papandreou met with Antonis Samaras, the leader of the opposition, and “agreed to form a new government,” according to an e-mailed statement from the office of President Karolos Papoulias in Athens. The sides will meet today to decide the head of the new government, as well as its mandate and timeframe.

Papandreou Steps Aside

Papandreou’s capitulation caps 10 days that began with him securing a second bailout from the European Union, then roiling markets by unilaterally deciding to put the terms of that rescue to the Greek people in a vote, a plan he later abandoned. Bowing to pressure from his party and the opposition, Papandreou pledged to stand aside for a government with wider support.

Exporters declined. Canon, the world’s biggest camera maker, fell 2 percent to 3,415 yen. Nissan Motor Co., Japan’s third- largest carmaker by market value, lost 1.6 percent to 723 yen.

Furukawa Electric slumped 12 percent to 192 yen. The company revised its full-year forecast to a loss of 5 billion yen ($64 million) from a 3 billion yen profit, citing losses from the stronger yen and Thai floods.

Osaka Securities advanced 7.3 percent to 391,500 yen after the Nikkei newspaper reported the Tokyo Stock Exchange, the main bourse in the world’s third-largest equity market, would offer to buy as much as 66 percent of its rival. The TSE and Osaka exchange said separately no decision had been made on the merger.

“In the current set-up, intensifying competition in terms of pricing and liquidity means that foreign investors will be moving their orders to Hong Kong or Singapore,” said Ichizo Yamauchi, principal executive officer at Tokyo-based Kokusai Asset Management Co., which manages the equivalent of 62.7 trillion yen. “There’s the danger that Japan will become a local market.”

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

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

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


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