Bloomberg News

Japan Stock Futures Fall as Yen Hits 10-Year High Against Euro

December 28, 2011

Dec. 29 (Bloomberg) -- Japanese stock futures and Australian shares declined as the yen rose to a 10-year high against the euro after a surge in the European Central Bank’s balance sheet to a record highlighted the growing risks of the debt crisis, clouding the earnings outlook for exporters.

American depositary receipts of Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by market value, sank 2.5 percent from the close in Tokyo. Sony Corp., a consumer- electronics maker that relies on Europe for a 21 percent of its sales, slid 1.6 percent. BHP Billiton Ltd., Australia’s top oil producer and the world’s No. 1 mining company, sank 1.1 percent after commodity prices fell.

Futures on Japan’s Nikkei 225 Stock Average were bid in the pre-market at 8,370 in Osaka at 8:05 a.m., compared with 8,420 yesterday. Australia’s S&P/ASX 200 Index fell 0.8 percent in Sydney today, while New Zealand’s NZX 50 Index slipped 0.4 percent in Wellington.

The surge in ECB lending “has caused the euro to drop against the yen, fueling investors’ concern on the region’s debt issues,” said Kenichi Hirano, general manager and strategist at Tachibana.

Futures on the Standard & Poor’s 500 Index rose 0.1 percent today. The index lost 1.3 percent yesterday in New York as the ECB’s balance sheet soared to a record 2.73 trillion euros ($3.55 trillion) to encourage purchases the region’s sovereign debt. Lending to euro-area banks jumped 214 billion euros to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement today.

Stock futures rose yesterday as Italy sold 9 billion euros of six-month Treasury bills and borrowing costs fell from the previous auction. A bigger test of the ECB’s lending on demand for European bonds comes today when Italy sells as much as 8.5 billion euros of longer-maturity debt.

The euro dropped against the yen to the lowest level since 2001. The 17-nation currency depreciated to as low as 100.73 yen today in Tokyo, compared with 101.61 at the close of stock trading yesterday. A weaker euro cuts the value of European income at Japanese companies when repatriated.

Commodity prices declined. Crude oil for February delivery fell 2 percent to $99.36 a barrel in New York yesterday, the lowest settlement since Dec. 21. The London Metal Exchange Index of prices for six metals including copper and aluminum sank 2.2 percent. Both oil and metals dropped the most since Dec. 14.

The MSCI Asia Pacific Index declined 18 percent this year through yesterday, compared with a fall of 0.6 percent by the S&P 500 and a 13 percent drop by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.6 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.4 times for the Stoxx 600.

--Editors: Jim Powell, Nick Gentle.

To contact the reporters on this story: Norie Kuboyama in Tokyo at; Masaaki Iwamoto in Tokyo at

To contact the editor responsible for this story: Nick Gentle at

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