Bloomberg News

Japanese Stocks Drop as Rate Cuts Fail to Lift Stocks

July 06, 2012

Nikkei Swings From Gain to Loss as Rate Cuts Fail to Lift Stocks

A visitor walks past the trading floor of the Tokyo Stock Exchange in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Japanese stocks dropped a second day, with the Nikkei 225 Stock Average (NKY) trimming a weekly gain, as rate cuts in Europe and China failed to boost investor confidence before a U.S. jobs report today.

JX Holdings Inc. (5020) paced declines among energy companies after crude prices fell amid concern economic growth is slowing. GS Yuasa Corp. (6674) sank 5.8 percent after Barclays Capital said fewer orders from Mitsubishi Motors Corp. may hurt the battery business. Kawasaki Kisen Kaisha Ltd. (9107), Japan’s third-largest line by sales, paced gains after a gauge of cargo rates climbed to a seven-week high.

The Nikkei 225 fell 0.7 percent to close at 9,020.75 in Tokyo, paring a fifth week of gains to 0.2 percent. The broader Topix Index slid 0.6 percent to 771.83. The European Central Bank and People’s Bank of China yesterday cut their benchmark borrowing costs, while the Bank of England increased its bond- buying program.

“The rate cuts have an announcement effect and they send a message that the authorities care about the economy, but the moves aren’t necessarily going to improve the macro-economic statistics,” said Ichiro Takamatsu, a fund manager at Tokyo- based Bayview Asset Management Co., which overseas about $1.9 billion.

The Topix has rebounded about 11 percent since June 4, when the index fell to its lowest level since 1983. Stocks rose after Greek voters elected pro-bailout parties and European leaders struck deals to contain the debt crisis.

U.S. Jobs

Shares on the Japanese benchmark trade at an average of 1.1 times book value, compared with 2.2 times for the Standard & Poor’s 500 Index and 1.4 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than value of their assets.

Futures on S&P 500 Index fell 0.1 percent today. The gauge slid 0.5 percent yesterday in New York, halting a three-day advance, as investors awaited Labor Department data expected to show the pace of hiring remained at less than half the average for the first quarter of the year.

“The global economy is slowing down,” said Kenichi Kubo, a senior fund manager at Tokio Marine Asset Management Co., which oversees 5.6 trillion yen ($70 billion). “Investors are reluctant to buy shares until there’s bottoming-out signals showing up in the data.”

Energy Shares

Energy companies declined after crude oil for August delivery fell 0.5 percent to $87.22 a barrel yesterday in New York and extended its drop today. JX, Japan’s biggest oil refiner, lost 2.5 percent to 391 yen. Showa Shell Sekiyu K.K. slipped 0.9 percent to 464 yen.

GS Yuasa tumbled 5.8 percent to 343 yen after Barclays cut the battery maker’s rating to underweight from equal-weight and reduced the share’s target price to 330 yen from 420 yen. Slumping sales at Mitsubishi Motors may hurt business, Barclays said.

Declines in Japanese stocks were limited as shipping lines advanced after the Baltic Dry Index (BDIY), a measure of cargo rates for commodities, jumped 3.2 percent yesterday to its highest close since May 21. Kawasaki Kisen rose 0.8 percent to 131 yen. Nippon Yusen K.K., Japan’s largest shipping line by sales, added 0.5 percent to 209 yen.

-- With Assistance from Adam Haigh in Tokyo. Editors: Jason Clenfield, Jim Powell

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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


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