Bloomberg News

Topix Gains in 3 Weeks High as Central Banks Fight Debt Crisis

December 01, 2011

Dec. 1 (Bloomberg) -- Japanese stocks rose, sending the Topix to its highest level in three weeks, after six central banks took action to fight Europe’s debt crisis and China eased lending curbs, boosting the outlook for economic growth in Japan’s biggest export market.

Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, gained 3.1 percent. Komatsu Ltd., a maker of construction machinery that counts China as its fastest- growing market, jumped 7.2 percent. Mitsui O.S.K. Lines Ltd. led shippers higher after SMBC Nikko Securities Inc. boosted ratings on companies in the sector, where shares have plunged by about half this year.

The Topix rose 1.6 percent to 740.01 at the 3 p.m. close in Tokyo, its highest since Nov. 9, after the Federal Reserve and five other central banks made it cheaper for European lenders to borrow in dollars. The Nikkei 225 Stock Average gained 1.9 percent to 8,597.38 today. The gauge dropped 6.2 percent last month amid concern Europe’s crisis is spreading.

“The action by the central banks is an effective way to address the current critical situation,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “China cut the reserve ratio for its banks earlier than expected.”

The Standard & Poor’s 500 Index jumped 4.3 percent in New York yesterday, its biggest gain since Aug. 11, after the Fed said it coordinated with the European Central Bank and central banks of Canada, Switzerland, Japan and the U.K. to fight Europe’s crisis by lowering the premium banks pay to borrow dollars overnight. Futures on the S&P slid 0.2 percent today.

Mitsubishi UFJ Financial gained 3.1 percent to 338 yen. Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 publicly traded lender, rose 3 percent to 2,151 yen.

Rallies Have Faded

Global equity markets have rallied this year after policy- makers unveiled measures to address Europe’s widening crisis, only to have gains evaporate. The Nikkei 225 advanced 3.5 percent in the two days following an Oct. 27 announcement of a deal on writedowns for Greek debt. In the next three days, the gauge sank more than 4 percent.

“Yesterday’s joint action by the central banks isn’t strong medicine,” said Tomokatsu Mori, an equities manager at Fukoku Mutual Life Insurance Co. in Tokyo. “It’s more like a band-aid.”

Exporters to China gained today after the People’s Bank of China said it will lower a restriction on mainland lenders. Komatsu jumped 7.2 percent to 2,032 yen. Smaller Hitachi Construction Machinery Co. gained 7.3 percent to 1,423 yen.

China Eases

China yesterday said it will cut the amount of cash that lenders must set aside as reserves for the first time since 2008. The decision to cut reserve ratios by 50 basis points may add 350 billion yuan ($55 billion) to the financial system, according to UBS AG.

Reports in the U.S. showed the world’s biggest economy is strong enough to skirt recession. Companies boosted payrolls in November by the most this year and U.S. businesses expanded at the fastest pace in seven months. Separately, the Fed said gains in manufacturing and consumer spending helped the economy expand at a “moderate” pace in 11 of its 12 districts.

Shipping lines gained the most among the 33 Topix industry groups. Nippon Yusen K.K. and Mitsui O.S.K gained at least 7.1 percent after SMBC Nikko raised ratings on Japan’s top two shippers to “outperform” from “neutral.” The Topix gauge of shipping companies has dropped more than 50 percent this year.

The Baltic Dry Index, a measure of shipping costs for commodities, gained 1 percent yesterday, rising for a third consecutive day.

--Editor: Jason Clenfield.

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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