Bloomberg News

Japanese Stocks Retreat Amid Falling Machinery Orders

October 11, 2012

Japanese shares fell, with the Nikkei 225 Stock Average (NKY) dropping to an 11-week low, after the nation’s machinery orders declined the first time in three months, renewing concern about global demand.

Fanuc Corp. (6954), Japan’s biggest maker of factory robotics, fell 2.7 percent. Nippon Sheet Glass Co. (5202), which gets 41 percent of sales in Europe, slid 1.7 percent after Spain’s debt rating was cut by Standard & Poor’s. Tokai Rika Co., a parts supplier to Toyota Motor Corp., plunged 9.6 percent after the world’s biggest automaker by market value recalled 7.4 million vehicles.

The Nikkei 225 Stock Average fell 0.6 percent to 8,546.78 at 3 p.m. in Tokyo, the lowest close since July 26. The broader Topix (TPX) Index declined 0.4 percent to 713.95, with two stocks retreating for each that rose. Shares pared losses after International Monetary Fund Managing Director Christine Lagarde said the global lender will spare no effort to help Greece.

“You can tell from the machine orders that overseas demand is bad as Japan-China relations worsen and China’s economy slows,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co., which oversees the equivalent of about 1.87 trillion yen ($24 billion). “The situation is pretty bleak and investors won’t be willing to buy for a while.”

The Topix slid 2 percent this year as a slowdown in the global economy boosted demand for the yen as a haven and as a territorial dispute with China saw Japanese production there disrupted, weighing on earnings. Policy makers in Asia, the U.S. and Europe have introduced a series of stimulus measures to support growth.

Machinery Orders

Shares on the Topix trade at about 0.85 times book value, compared with 2.22 for the Standard & Poor’s 500 Index and 1.49 times for the Stoxx Europe 600 Index. A number lower than one means a company can be bought for less than the value of its assets.

Stocks dropped after a government report today showed Japan’s machinery orders fell 3.3 percent in August after rising 4.6 percent in July. Analysts surveyed by Bloomberg had expected a 2.3 percent decline.

Fanuc declined 2.7 percent to 12,120 yen. Mitsubishi Heavy Industries Ltd., a heavy-machinery maker, lost 2 percent to 339 yen.

Tokai Rika plunged 9.6 percent to 905 yen after Toyota recalled about 7.43 million vehicles for a faulty window switch. The parts supplier counts Toyota as its largest customer. A gauge of transportation equipment companies on the Topix slid 1 percent.

Futures on the S&P 500 (SPXL1) were little changed today. The index declined 0.6 percent in New York yesterday at the opening of an earnings season expected to show that profits and sales of S&P 500 listed companies fell in unison for the first time in three years, according to analysts’ estimates compiled by Bloomberg.

Spain Rating

Spain’s debt rating was lowered two levels to BBB- from BBB+, S&P said yesterday, citing mounting economic and political risks. The rating company assigned a negative outlook on the nation’s debt.

Exporters to Europe fell, with Nippon Sheet Glass dropping 1.7 percent to 58 yen. Makita Corp. (6586), a maker of power tools that depends on the region for 42 percent of its sales, lost 0.6 percent to 2,963 yen.

The Nikkei Stock Average Volatility Index (VNKY) rose 7.1 percent to 19.38, indicating traders expect a swing of about 5.6 percent on the benchmark gauge over the next 30 days. Volume on the Nikkei 225 was 9.7 percent above 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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