Bloomberg News

Topix Drop First Time in Four Days After S&P Cuts Banks’ Ratings

November 30, 2011

Nov. 30 (Bloomberg) -- Japanese stocks fell, with the Topix Index dropping for the first time in four days, after Standard & Poor’s cut credit ratings for U.S. lenders including Bank of America Corp. and a European official said the region’s bailout fund may fall short of its goal.

Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 bank by market value, fell 1 percent. Sony Corp., the country’s biggest exporter of consumer electronics, lost 1.4 percent. Nippon Yusen K.K., Japan’s top shipping line by sales, dropped 4.5 percent after Moody’s Investors Service put the company on review for a possible downgrade. Nippon Electric Glass Co. slipped 4.4 percent after industry leader Corning Inc. cut its earnings forecast.

The Topix lost 0.2 percent to 728.46 at the 3 p.m. in Tokyo. The Nikkei 225 Stock Average dropped 0.5 percent to 8,434.61. The gauge declined 6.2 percent this month, erasing October’s gains, as signs emerged that Europe’s debt crisis is spreading to major economies.

“The rating cuts for the banks may have a negative impact on investor sentiment,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo. “What investors are really paying attention to is whether policy makers are going to take steps to resolve the European debt situation.”

Futures on the Standard & Poor’s 500 Index fell 0.7 percent today. The index rose 0.2 percent yesterday in New York as consumer confidence increased by the most since 2003, overshadowing reports showing less-than-forecast new home sales and a bigger-than-expected drop in some U.S. housing prices.

Bank Downgrades

Bank of America, Goldman Sachs Group Inc. and Citigroup Inc. had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the largest global lenders.

Japanese lenders dropped after the downgrades. Sumitomo Mitsui Financial Group fell 1 percent to 2,089 yen. Larger Mitsubishi UFJ Financial Group Inc. lost 0.9 percent to 328 yen.

Stocks fell even after Japan’s industrial production increased more than analysts expected in October. Factory output rose 2.4 percent from September, the trade ministry said. The number compares with the median economist prediction for a 1.1 percent gain.

Exporters declined on concern Europe will struggle to contain its debt crisis. Nikon Corp., a camera maker that depends on the region for about a quarter of its sales, slid 1 percent to 1,771 yen. Sony fell 1.4 percent to 1,372 yen.

‘Difficult To Reach’

An agreement hammered out last month to expand the European Financial Stability Facility’s firepower to 1 trillion euros with leveraging will be “very difficult to reach,” Luxembourg Finance Minister Luc Frieden told reporters before euro-area finance chiefs met in Brussels.

“The European situation is still at the center of market concerns,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “Investors will likely sell shares to lock into profit after recent gains.”

Shipping lines declined the most among the Topix’s 33 industry groups after surging 14 percent in the previous three trading sessions.

Nippon Yusen sank 4.5 percent to 169 yen, extending an earlier decline after Moody’s placed the company’s credit rating on review for a possible downgrade. Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd., Japan’s No. 2 and 3 shipping companies, both fell at least 3.6 percent.

Glassmakers Drop

Nippon Electric Glass led a drop among glassmakers after Corning, the world’s largest maker of glass for flat-panel televisions, cut its fourth-quarter earnings forecast because of a lost contract and price declines.

Nippon Electric slumped 4.4 percent to 770 yen. Asahi Glass Co. fell 2.7 percent to 644 yen.

Scandal-hit Olympus gained 2.2 percent to 1,025 yen, rebounding from earlier losses of as much 13 percent after the company said it is preparing to file a corrected financial report to the stock exchange by Dec. 14. The optical equipment maker was responding to a Wall Street Journal report that it might miss the deadline, causing the firm to be delisted.

Power companies advanced as investors turned to so-called “defensive stocks,” according to Angus Gluskie, who manages about $300 million at White Funds Management in Sydney.

Tokyo Electric Power Co., Japan’s largest utility, climbed 1.4 percent to 284 yen. Smaller Kansai Electric Power Co. increased 2.1 percent to 1,144 yen. The Nikkei newspaper reported Kansai Electric plans to add 12 financial institutions to the ranks of its lenders as it seeks overcome difficulty in selling bonds.

“People who are selling off cyclicals are also positioning themselves in stocks with defensive tilt, such as utilities and consumer staples,” Gluskie said. “People are very concerned where things are at the present economically around the world.”

--With assistance from Masaaki Iwamoto in Tokyo and Kana Nishizawa in Hong Kong. Editor: Jason Clenfield.

To contact the reporter 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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