Bloomberg News

Japanese Stocks Drop as ECB Chief Damps Bond-Buying Speculation

December 10, 2011

Dec. 9 (Bloomberg) -- Japanese stocks fell, sending the Nikkei 225 Stock Average to its biggest drop in two weeks, after the European Central Bank damped speculation it would step up debt purchases.

Sony Corp., a consumer electronics maker which depends on Europe for about 20 percent of its sales, lost 3.3 percent. Mizuho Financial Group Inc., Japan’s No. 3 lender by market value, slid 1.9 percent. Kawasaki Kisen Kaisha Ltd. dropped 5.4 percent after Mitsubishi UFJ Morgan Stanley Securities Co. cut the shipping line’s target price.

“The ECB outcome means the European issues won’t be solved easily,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “The best scenario that the market had expected was for the ECB to decide to expand purchases of government bonds and then for the European Union to strengthen finance regulations” at a summit being held in Brussels.

The Nikkei 225 fell 1.5 percent to 8,536.46 at the 3 p.m. close in Tokyo, its biggest drop since Nov. 24. The broader Topix Index lost 0.9 percent to 738.12. The Topix had a weekly decline of 0.8 percent.

The Standard & Poor’s 500 Index slid 2.1 percent in New York yesterday, snapping a three-day rally, after the ECB disappointed expectations it would expand its 207 billion-euro ($276 billion) bond-buying program.

Draghi ‘Surprised’

European Central Bank President Mario Draghi, speaking after the bank announced an interest rate cut, said he was “surprised” that markets interpreted earlier comments as hinting at big bond buys. He said a euro-zone “fiscal compact” is the “most important precondition” for normalizing markets and “the responsibility is with the leaders.”

Later in Brussels, Europe leaders laid out a new fiscal plan to prevent future debt runups, accelerated the startup of a planned 500 billion-euro rescue fund and scaled back bondholder loss-sharing provisions.

Exporters to the region fell, with Sony declining 3.3 percent to 1,405 yen. Kyocera Corp., another electronics maker that gets almost 20 percent of its sales in Europe, lost 2.5 percent to 6,630 yen.

Japan GDP

Stocks also fell today after Japan’s economy grew less than the government initially estimated. Gross domestic product expanded at an annualized 5.6 percent pace last quarter, the Cabinet Office said today in Tokyo, compared with a preliminary figure of 6 percent. Economists surveyed by Bloomberg had estimated a 5.2 percent rise.

Banks, insurers and brokerages declined. Mizuho fell 1.9 percent to 104 yen. Dai-ichi Life Insurance Co. sank 3.2 percent to 82,000 yen. Daiwa Securities Group Inc. slipped 3.4 percent to 255 yen.

The Topix has tumbled 18 percent this year amid concern U.S. growth is sputtering and Europe’s debt crisis will damage the banking system, damping demand in two of Japan’s biggest export markets. The decline has cut the price of shares on the index to 0.9 times book value, near the lowest since March 2009.

Kawasaki Kisen dropped the most in the Nikkei 225, falling 5.4 percent to 139 yen, after Mitsubishi UFJ Morgan Stanley cut the shipping line’s stock price estimate to 180 yen from 200 yen, citing falling cargo rates on European routes.

Developers Retreat

Developers also declined after Miki Shoji Co., a privately held office broker, yesterday said the vacancy rate for Tokyo office space rose to 8.9 percent in November from 8.78 percent the month before.

Mitsui Fudosan sank 3.6 percent to 1,192 yen. Mitsubishi Estate Co. declined 3.4 percent to 1,275 yen. Sumitomo Realty & Development Co. slid 3.8 percent to 1,469 yen.

Stocks tied to China also fell on a report mainland industrial production rose 12.4 percent from a year earlier, its slowest pace since August 2009.

TDK Corp., a manufacturer of electronic parts that gets almost a third of its revenue from China, fell 1.7 percent to 3,540 yen. Hitachi Construction Machinery Co., which makes excavators and other heavy equipment, slipped 1.9 percent to 1,374 yen.

-- Editors: Jason Clenfield, Jim Powell.

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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