Bloomberg News

Japanese Stocks Retreat on Earnings, ECB; Sharp Plunges

August 03, 2012

Japanese stocks fell, with the Nikkei 225 (NKY) Stock Average erasing this week’s gain, as Sharp Corp. (6753) and Sony Corp. plunged after cutting forecasts, and the European Central Bank refrained from taking immediate action to support the monetary union.

Sharp tumbled 28 percent to the lowest since 1975 after widening its full-year loss estimate. Sony, Japan’s biggest exporter of consumer electronics, sank 7 percent after cutting its profit outlook. Nintendo Ltd. (7974), a maker of gaming consoles that gets 34 percent of sales in Europe, fell 2.6 percent. Brother Industries Ltd., an office-equipment maker, advanced 7.4 percent as profit soared.

The Nikkei 225 slid 1.1 percent to 8,555.11 at the close of trading in Tokyo, bringing this week’s drop to 0.1 percent. The broader Topix Index today retreated 1.2 percent to 723.94, with more than seven shares falling for each that rose.

“Markets are continually disappointed when expectations aren’t met,” said Peter Esho, chief market strategist at City Index Ltd., a provider of equities, bonds and currency trading in Sydney. “Expectations for the ECB were out of line.”

The Topix lost 17 percent since this year’s peak on March 27 amid slowing growth in the U.S. and China, and concern Europe’s debt crisis is spreading. Shares on the gauge trade at 0.9 times book value, compared with 2.1 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.

ECB Postpones Action

Futures on the S&P 500 were little changed today. The gauge fell 0.7 percent in New York yesterday after ECB President Mario Draghi decided to postpone action by demanding euro-zone governments turn to existing rescue funds before the central bank intervenes. Investors are awaiting U.S. jobs data today, which may give clues to the Federal Reserve’s next steps to address weakening economic expansion.

China will conduct policy fine-tuning at an appropriate time and consumer inflation may rebound after August, the People’s Bank of China said in a quarterly monetary-policy report on its website yesterday. The government today is scheduled to report data on the nation’s non-manufacturing industries in July.

About half of the 234 companies on the Topix that have reported quarterly earnings since the start of last month and for which forecasts are available have missed expectations, according to data compiled by Bloomberg News.

Sony, Sharp

Sharp tumbled 28 percent, a record one-day drop, to 192 yen. The maker of liquid crystal displays forecast an annual loss of 250 billion yen ($3.2 billion) yesterday as demand for its Aquos TVs slumped. The company also announced its first layoffs since 1950s as Japan’s electronics makers shed staff to return to profitibility amid competition with Samsung Electronics Co. and Apple Inc.

Sony (6758) lost 7 percent to 897 yen after reducing its full-year net income forecast by a third to 20 billion yen, citing slowing demand while the strong yen erodes overseas earnings.

Exporters to Europe dropped following the ECB statement and Draghi’s press conference yesterday. Nintendo slid 2.6 percent to 8,320 yen. Nissan Motor Co., a carmaker that gets 16 percent of sales in the region, dropped 1.6 percent to 738 yen.

Brother surged 7.4 percent to 768 yen as first-quarter net income increased 57 percent to 10.3 billion yen.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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


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