Bloomberg News

Japanese Stocks Gain on Optimism Europe Will Act to Stem Crisis

December 07, 2011

Dec. 7 (Bloomberg) -- Japanese stocks rose, sending the Nikkei 225 Stock Average to a one-month high, on speculation European leaders will step up efforts to fight the debt crisis at a summit tomorrow as 15 euro nations face the threat of rating downgrades.

Sony Corp., which depends on Europe for 20 percent of its sales, gained 5.9 percent. Mitsui O.S.K. Lines Ltd., operator of the world’s largest merchant fleet, soared 11 percent after saying it plans to form a global pool of oil tankers with four other companies. Meiji Holdings Co. rebounded 5.1 percent after plunging yesterday on a report radioactive cesium was found in its powdered milk.

“Even when there’s more bad news from Europe, there’s a feeling that prices have hit bottom,” said Toshio Sumitani, a strategist at Tokai Tokyo Research Center. “There’s more confidence in Europe’s efforts to solve its problems and investors are also starting to focus on the U.S.’s unexpected strength.”

The Nikkei 225 rose 1.7 percent to 8,722.17 at the 3 p.m. close in Tokyo, its highest since Nov. 9. The gauge has risen almost 7 percent in the past seven trading days as the Federal Reserve and five other central banks cut the cost of borrowing dollars for European banks and China lowered lending curbs. The broader Topix advanced 1.6 percent to 749.63 today.

Japanese stocks extended gains after the yen depreciated to as low as 104.39 against the euro today in Tokyo, compared with 103.97 at the close yesterday. A weaker yen boosts Japanese companies’ overseas income when repatriated.

Futures on the Standard & Poor’s 500 Index added 0.6 percent. The gauge gained 0.1 percent in New York yesterday. The U.S. economy is showing signs of recovery, with a Dec. 2 report that joblessness fell to a two-year low of 8.6 percent.

Brussels Summit

Exporters gained on optimism European leaders will act to tackle the region’s debt. Sony gained 5.9 percent to 1,452 yen. Ricoh Co., an office-equipment and camera maker that gets more than 20 percent of its revenue in Europe, climbed 3.4 percent to 699 yen.

German Finance Minister Wolfgang Schaeuble said Standard & Poor’s move yesterday to place 15 euro nations, including Germany and France, on review for possible downgrades will help force European leaders to ratchet up efforts to resolve the debt crisis at their summit in Brussels on Dec. 8-9. The ratings company said cuts would depend on the meeting’s outcome.

Bailout Fund Threatened

Standard & Poor’s also said yesterday the European Financial Stability Facility may lose its top credit rating if any of its guarantors have their debt grade reduced.

The Financial Times reported euro leaders are weighing doubling the amount of the rescue package. Negotiators are considering allowing the euro zone’s existing 440 billion euro ($590 billion) bailout fund to continue running when a new 500 billion euro facility comes into force in mid-2012, according to the report.

“There is an expectation in the market that Europe will advance measures to overcome the debt issues,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “While there’s a sense of expectation in the market, investors still want to see the results of meetings this week of the European Union and European Central Bank.”

Shipping Stocks Advance

Mitsui O.S.K. soared 11 percent to 288 yen after saying it will jointly operate 50 oil tankers with partners to cut costs. Industry returns are at the lowest levels in more than a decade as fleets expand faster than demand to transport crude.

Nippon Yusen K.K., Japan’s largest shipping line by sales, jumped 7.9 percent to 192 yen. Kawasaki Kisen Kaisha Ltd., the third biggest, soared 7.3 percent to 147 yen. The Topix industry group tracking shipping lines, which has dropped by about half this year, today advanced the most among the index’s 33 groups.

Dairy-product maker Meiji gained 5.1 percent to 3,175 yen after saying small traces of radioactivity in its products posed no health risks. The stock dropped 9.7 percent yesterday after Kyodo News reported cesium was found in its powdered milk after the meltdowns at the Fukushima nuclear power plant.

Among companies that fell, Olympus Corp. declined the most in the Nikkei 225, falling 5.2 percent to 1,128 yen after the Tokyo Stock Exchange yesterday put the scandal-hit endoscope maker on an investigation watch list, suggesting the company is at risk of delisting even if it produces an earnings report by the Dec. 14 deadline.

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

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