Bloomberg News

Japan Stock Futures Signal Halt to Rally as Europe Woe Persists

December 01, 2011

Dec. 2 (Bloomberg) -- Japanese stock futures traded little changed, signaling stocks will fail to extend yesterday’s rally as concern over Europe’s debt crisis overshadowed better-than- forecast U.S. manufacturing growth.

American depositary receipts of Sony Corp. which depends on Europe for about 20 percent of its sales, slipped 0.8 percent from the closing price in Tokyo yesterday. Those of Honda Motor Co., the country’s second-biggest carmaker by market value, dropped 1.2 percent, following a 4 percent advance a day earlier that came after central banks took joint action to fight Europe’s crisis. Billabong International Ltd., a maker of surfwear that counts the U.S. as its biggest market, rose 1.9 percent in Sydney.

“There still isn’t any improvement on the European debt issue,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees the equivalent of $68 billion. “Unless Germany -- the leading player -- changes its stance, there can’t be a solution to the essence of the problem.”

Futures on Japan’s Nikkei 225 Stock Average expiring in December closed at 8,590 in Chicago yesterday, slipping from 8,600 in Osaka, Japan. The contracts were bid in the pre-market at 8,590 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index was little changed today. New Zealand’s NZX 50 Index fell 0.4 percent in Wellington.

Futures on the Standard & Poor’s 500 Index were little changed today. The S&P 500 index fell 0.2 percent yesterday in New York as U.S. manufacturing expanded in November and a rally in French and Spanish bonds were not enough to extend the biggest three-day gain in the gauge since March 2009.

Merkel’s Stance

In the days before a speech to German lawmakers today outlining her stance for a Dec. 9 European summit, Chancellor Angela Merkel has repeated her push to rework European Union rules to lock in budget monitoring and enforcement and seal off the European Central Bank from political pressure. That risks a showdown with EU leaders and extends her conflict with financial markets looking for immediate measures to end the contagion.

The ECB is independent and must choose its own method of ensuring the euro’s stability “without being praised or criticized” and states must protect that independence by improving their finances, the Westdeutsche Zeitung quoted Merkel as saying in an interview released today. The government sees joint euro bonds as “the wrong remedy in this phase of European development and even damaging,” she told the newspaper.

The MSCI Asia Pacific Index declined 15 percent this year through yesterday, compared with a 1 percent drop by the S&P 500 and a 14 percent slump by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.9 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.5 times for the Stoxx 600.

--Editors: Jason Clenfield, Jim Powell.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@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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