Bloomberg News

Japanese Stocks Snap 2-Day Gain on Europe Growth Concern

July 04, 2012

July 5 (Bloomberg) --Japanese stocks swung between gains and losses ahead of a policy meeting today at which the European Cental Bank is expected to cut interest rates to a record low and as services data in Germany and the U.K. added to signs of the region’s economic slowdown.

Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, rose 1 percent as the yen weakened and Bank of Japan Governor Masaaki Shirakawa said he’d do the utmost to ensure the country’s financial stability. Osaka Securities Exchange Co. added 0.7 percent after regulators approved its takeover by Tokyo Stock Exchange Group Inc. GS Yuasa Corp. dropped 3.2 percent after Goldman Sachs Group Inc. cut the battery maker’s price target.

The Nikkei 225 Stock Average (NKY) fell 0.2 percent to 9,087.25 as of 10:32 a.m. in Tokyo after gaining as much as 0.3 percent. The broader Topix (MXAP) Index slipped 0.1 percent to 777.82, retreating from the highest level since May 2. Trading volume on the gauge was 13 percent below the 30-day average ahead of the ECB’s rate decision today and a U.S. jobs report tomorrow.

“One thing that’s common among all major central banks is that they stand ready for further monetary easing if they see the need,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $70 billion. “Domestic factors have a limited impact on Japanese shares, and so you don’t want to make a big move ahead of major events abroad.”

Topix Rebound

The Topix has rebounded 12 percent since June 4, when it plunged to its lowest since 1983, after euro-zone leaders agreed to relax conditions for rescuing lenders and as speculation mounted that central banks will support the global economy if needed. The advance has boosted the average price of shares on the gauge to 1.1 times book value, compared with 2.2 times for the Standard & Poor’s 500 Index (SPXL1) and 1.4 times for the Europe Stoxx 600 Index.

Bank of Japan Governor Masaaki Shirakawa said today the central bank will pursue appropriate monetary policy.

Futures on the Standard & Poor’s 500 Index were little changed today as ECB officials are expected to lower their benchmark rate by a quarter point to a record low of 0.75 percent today, according to the median forecast of economists surveyed by Bloomberg. The Bank of England today will raise its target for bond purchases, according to another Bloomberg survey.

“The market is likely to be in a gridlock,” said Mitsushige Akino, Tokyo-based chief fund manager at Ichiyoshi Investment Management Co., which oversees about 40 billion yen ($501 million). “You want to wait and see how the ECB meeting and the U.S. jobs data will come out. It’s not easy to buy or sell.”

U.S. employers are expected to have increased payrolls by 90,000 workers in June after a 69,000 gain in May, according to the median estimate of 59 economists surveyed by Bloomberg News ahead of Labor Department figures due tomorrow.

Bourse Merger

Japan Fair Trade Commission today approved Tokyo Stock Exchange’s plan to acquire the Osaka exchange. The 480,000 yen- per-share takeover will now proceed, and the deal is expected to be completed by Jan. 1, the bourses said. Osaka Securities rose 0.7 percent to 3,000 yen.

The Nikkei 225 Volatility Index (VNKY) rose 2.6 percent to 19.96, indicating traders expect a swing of about 5.7 percent on the benchmark gauge over the next 30 days. Foreign investors sold 50 billion yen in Japanese stocks last week, the Ministry of Finance said today.

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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