Bloomberg News

Nikkei 225 Rises Most in Seven Weeks on G-7 Cooperation

June 06, 2012

Japan’s Nikkei 225 Stock Average (NKY) rose the most in seven weeks after Group of Seven leaders agreed to coordinate efforts on Europe’s debt crisis before the region’s central bank meets today.

Nippon Sheet Glass Co. (5202), which generates 39 percent of its revenue in Europe, added 11 percent. Toyota Motor Corp. (7203), a carmaker that relies on the U.S. for a fifth of its sales, climbed 2.5 percent after the yen extended losses against the dollar yesterday. Tokyo Derica Co., a seller of women’s leather handbags, surged 17 percent after canceling a share sale.

The Nikkei 225 rose 1.8 percent to 8,533.53 at the 3 p.m. close of trading, its biggest gain since April 18. The gauge fell nine straight weeks through June 1, the longest losing streak since 1992. Shares extended gains on speculation investors adjusted positions before the quarterly settlement day for futures and options at the end of the week.

“The G-7 sent a message that they will do something if the market falls further,” said Kazuyuki Terao, chief investment officer of RCM Japan Co. RCM oversees about $153 billion globally. “Valuations signal a buy. The market is waiting for a turnaround in overseas circumstances.”

The broader Topix Index gained 1.5 percent to 718.56 on speculation shares were oversold after dropping this week to its lowest since 1983. The measure fell 18 percent from this year’s high on March 27, entering a bear market amid slowing growth in China and concern the European crisis is deepening. Stocks on the measure are valued at 0.85 times book value, about the same level as in October 2008 amid the global financial crisis.

Futures, Options Settlement

Stocks extended gains as investors bought to minimize losses on bets the Nikkei 225 will fall ahead of a June 8 quarterly settlement of futures and options contracts, according to Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. The settlement is known as the “special quotation.”

“As we get close to the special quotation, I think few people had expected the Nikkei to go above 8,500 today,” Hirano said. “Sellers are poised to buy back above that level.”

Futures on the Standard & Poor’s 500 Index (SPXL1) added 0.5 percent today before the European Central Bank meets in Frankfurt and Federal Reserve Chairman Ben S. Bernanke testifies before the U.S. Congress on the economic outlook.

“Investors are waiting to see if we get signs of new additional monetary easing out of today’s ECB and tomorrow’s Bernanke,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “A selloff is taking a pause, but it’s not that we have convincing reasons to buy.”

G-7 Pledge

Shares also rose after G-7 officials said they will work together to help Spain and Greece get their public finances on sustainable footing, Japanese Finance Minister Jun Azumi told reporters in Tokyo after a conference call. The yen fell against the dollar yesterday as he indicated the group remains supportive of intervention to address extreme currency moves.

Spain may receive a precautionary credit line from the European Financial Stability Facility, Germany’s Die Welt newspaper reported in a preview of a story, citing unidentified people familiar with the matter.

Exporters to Europe climbed, with Nippon Sheet Glass rising 11 percent to 81 yen. Shimano Inc., a maker of bicycle parts that depends on Europe for 36 percent of its sales, gained 1.7 percent to 4,800 yen.

Companies that do business in the U.S. advanced after the yen yesterday slid against 15 of its 16 major counterparts including the greenback. Toyota added 2.5 percent to 2,999 yen. Komatsu Ltd. (6301), a construction machinery maker that gets 23 percent of its revenue in the Americas, rose 2.4 percent to 1,845 yen.

Tokyo Derica Soars

Tokyo Derica surged the most on the 1,674-member Topix after it scrapped a stock sale. Three shareholders had planned to sell 1.83 million shares to the public, the company said on May 25. The shares jumped 17 percent to 701 yen.

The Nikkei 225 Volatility Index (VNKY) slid 3.9 percent to 26.90, indicating traders expect a swing of about 8 percent on the benchmark gauge over the next 30 days. Trading volume was 27 percent below the 30-day average.

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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