Bloomberg News

Japan Stocks Fall on U.S. Data as Spain Denies Bailout

June 01, 2012

Topix Caps Longest Losing Streak Since 1975 on China, U.S. Data

The Topix slipped 1.5 percent to 708.93 as of the 3 p.m. trading close in Tokyo, capping a ninth week of decline that left it 1.8 percent lower for the five trading days. Photographer: Tomohiro Ohsumi/Bloomberg

Japanese stocks fell, sending the Topix Index to its longest weekly losing streak since September 1975, after China’s manufacturing and U.S. economic data missed estimates, adding to concern the world’s two largest economies are slowing.

Sony Corp. (6758), which gets 26 percent of its sales in China and the U.S., dropped 3.5 percent. Hitachi Construction Machinery Co. (6305), a maker of heavy equipment, slid 4.2 percent after mining machinery bellwether Joy Global Inc. cut revenue forecasts. Aozora Bank Ltd. dropped 5.4 percent after saying plans to repay public funds won’t be disclosed at its June shareholder meeting.

The Topix slipped 1.5 percent to 708.93 as of the 3 p.m. trading close in Tokyo, capping a ninth week of decline that left it 1.8 percent lower for the five trading days. The Nikkei 225 Stock Average (NKY) dropped 1.2 percent to 8,440.25. About five stocks fell for each that rose. The benchmark dropped 10.3 percent in May, the steepest monthly decline since May 2010.

“The global economy, centered in the U.S. and China, is facing stronger headwinds than expected, and recovery expectations are tapering off a bit,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $70 billion. “Japan’s economy doesn’t have the kind of domestic demand that you need to spur growth, so it’s more vulnerable to overseas economies.”

Debt Crisis

The Topix has fallen 19 percent from this year’s high on March 27 as voter opposition to austerity measures in Europe raised concern the debt crisis is worsening, and as China’s growth slowed. The gauge is nearing a 20 percent drop from this year’s peak, which to investors signals the beginning of a bear market. The declines have cut the value of shares on the Topix to 0.84 times book value, the lowest since October 2008.

Stocks fell as China’s purchasing managers’ index slid to 50.4 from 53.3 in April, the statistics bureau and logistics federation said today. The weakest reading since December compares with the 52.0 median estimate in a Bloomberg News survey of 27 economists. A reading above 50 indicates expansion. A separate gauge from HSBC Holdings Plc and Markit Economics showed a seventh straight contraction.

Companies that do business in China fell. Murata Manufacturing Co., which gets 48 percent of its revenue in China and Taiwan, lost 2.8 percent to 3,955 yen. Trading company Emori & Co. (9963), which depends on China for 41 percent of its sales, dropped 1.3 percent to 913 yen.

U.S. Jobs Data

A U.S. Labor Department report due today is projected to show nonfarm payrolls increased by 150,000 workers in May while the unemployment rate held at 8.1 percent.

Futures on the Standard & Poor’s 500 Index (SPXL1) slid 0.4 percent today. The index fell 0.2 percent in New York yesterday, when data showed the U.S. economy grew more slowly in the first quarter than previously estimated and business activity expanded in May at the slowest pace since September 2009.

The U.S. payroll report “is going to be important obviously on the day, but the big issue is how Europe is going to play out,” said Andrew Pease, Sydney-based chief investment strategist for the Asia-Pacific region at Russell Investment Group, which manages about $150 billion. “Spanish bond yields are about 6.5 percent and that tells you something that can’t be ignored. While Spanish yields are that high, you have to have a fairly cautious attitude toward adding risk to your portfolio right now.”

No Spain Bailout

The International Monetary Fund said it’s not preparing financial aid for Spain, and the country denied it’s in talks about a bailout. The nation’s 10-year debt yields were at 6.56 percent, near the 7 percent level that prompted bailouts in Greece, Ireland and Portugal.

Japanese exporters also fell after the yen touched its highest level against the euro since December 2000. A strong currency erodes the value of overseas revenue when companies repatriate earnings.

Sony, the nation’s largest exporter of consumer electronics, declined 3.5 percent to 1,013 yen, and Honda Motor Co. (7267), Japan’s second-biggest automaker by market value, fell 2.1 percent to 2,459 yen.

Machinery Makers Fall

Machinery makers fell after Joy Global, the maker of P&H and Joy mining equipment, cut forecasts for full-year earnings and revenue as mining companies ease capital expenditure amid concern over the slowdown in China. Hitachi Construction slid 4.2 percent to 1,449 yen. Komatsu Ltd. (6301), Japan’s largest construction machinery maker, lost 4.3 percent to 1,798 yen.

Aozora Bank, the Japanese lender controlled by Cerberus Capital Management LP, fell 5.4 percent to 157 yen after saying it won’t announce proposals for repayment of public funds at its June shareholders meeting.

Among stocks that rose, Janome Sewing Machine Co. jumped 17 percent to 62 yen. Operating profit is poised to more than double this fiscal year, the Nikkei newspaper reported.

The Nikkei 225 Volatility Index (VNKY) rose 5.5 percent to 27.65, indicating traders expect a swing of about 7.9 percent on the benchmark gauge over the next 30 days.

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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