Bloomberg News

Japanese Stocks Fall Ahead of Bond Sales in Spain, France

April 19, 2012

Japanese shares fell, with the Nikkei 225 (NKY) Stock Average paring gains from its biggest advance in three weeks yesterday, as investors awaited bond auctions in France and Spain after bad loans held by Spanish banks surged.

Nikon Corp., a camera maker that gets more than a fifth of its sales from Europe, dropped 2 percent in Tokyo. Inpex Corp., Japan’s No. 1 energy explorer, fell 0.8 percent after crude prices slid. Nippon Sheet Glass Co. dropped to its lowest since 1976 after saying Chief Executive Officer Craig Naylor quit following a clash with the board on strategy.

The Nikkei 225 fell 0.8 percent to 9,588.38 at the 3 p.m. close of trading in Tokyo, paring yesterday’s 2.1 percent advance. The broader Topix Index slipped 0.6 percent to 814.13, with all but two of its 33 industry groups falling. Losses were limited after Bank of Japan Governor Masaaki Shirakawa said he’s “committed” to continuing monetary easing.

“The Nikkei is following a drop in global shares,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has $405 billion in assets. “There’s a good chance that concern about the banking sector will increase, particularly in Spain and Italy. The market will get a lot more nervous if a fiscal issue leads to a banking issue.”

The benchmark Nikkei 225 has retreated more than 6 percent since March 27 on renewed concern that Europe’s debt crisis is spreading and signs China’s economy is slowing.

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.3 percent today. The gauge dropped 0.4 percent in New York yesterday as bellwethers Intel Corp. and International Business Machines Corp. posted the slowest sales growth in more than two years as the European slump weighed on orders.

Euro Debt Sales

Shares declined as Spain and France plan to raise as much as 13.5 billion euros ($17.7 billion) in debt today as Spanish Prime Minister Mariano Rajoy’s struggles to meet deficit targets and the French presidential elections drive up yields.

Non-performing loans in Spain as a proportion of total lending jumped to 8.2 percent in February, the highest level since 1994, from less than 1 percent in 2007, the Bank of Spain said yesterday.

Companies that do business in Europe retreated. Nikon slid 2 percent to 2,343 yen. Canon, a camera maker that generates 31 percent of its sales in Europe, lost 1.1 percent to 3,780 yen.

Commodity-related stocks dropped after crude for May delivery slid 1.5 percent yesterday to $102.67, the lowest close since April 10, and the London Metal Exchange Index of six industrial commodities fell 0.5 percent. Inpex lost 0.8 percent to 522,000 yen. Mitsui Mining & Smelting Co. dropped 1.9 percent to 206 yen.

Nippon Sheet Glass

Nippon Sheet Glass fell to the lowest level in more than three decades after Naylor resigned because of disagreements with the board. The stock fell 6.9 percent to 108 yen, the lowest since April 1976. The departure leaves only three non- Japanese CEOs at the helm of Nikkei 225 companies.

Losses in shares were limited as Bank of Japan Governor Shirakawa signaled support for more easing. The central bank will expand asset purchases at a meeting on April 27 after refraining from introducing new measures earlier this month, Morgan Stanley MUFG Securities Co., Mizuho and SMBC Nikko predict.

“When the market falls, expectations for monetary policy rise and people speculate the BOJ would act more aggressively,” said Kazuyuki Terao, chief investment officer of RCM Japan Co., which oversees about $138 billion globally. “Most people are expecting them to do something. If they don’t, the market would be very disappointed.”

The Nikkei 225 Volatility Index added 2.3 percent to 19.79, indicating traders expect a swing of about 5.7 percent on the benchmark equity gauge over the next 30 days. Trading volume today was 16 percent below the 30-day average.

Shares on the Topix are valued at one times book value, compared with 2.2 times for the S&P 500 and 1.4 times for the Stoxx Europe 600 Index. A number below one means that investors can buy companies for less than the value of their assets.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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