Bloomberg News

Japanese Stock Futures Decline on Spain Rating Downgrade

October 10, 2012

Japanese stock futures fell after a cut in Spain’s debt rating by Standard & Poor’s reminded investors of the risk of Europe’s debt crisis, sapping demand for riskier assets. Australian equities dropped.

American depositary receipts of camera maker Canon Inc. (7751), which gets 31 percent of its revenue in Europe, dropped 1.1 percent from the closing share price in Tokyo. ADRs of Komatsu Ltd. (6301), Japan’s largest construction machinery maker, dropped 1.1 percent after a preliminary report showed the nation’s machine tool orders fell last month. Lynas Corp. slumped 19 percent in Sydney after a court ruling further delayed the development of its rare-earth refinery in Malaysia.

Futures on Japan’s Nikkei 225 Stock Average (NKY) expiring in December closed at 8,550 in Chicago yesterday, down from 8,590 in Osaka, Japan. They were bid in the pre-market at 8,530 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index retreated 0.6 percent today. New Zealand’s NZX 50 Index dropped 0.4 percent in Wellington.

S&P’s downgrade of Spain “reminds people that the situation remains difficult,” said Angus Gluskie, managing director at White Funds Management in Sydney who manages more than $350 million. “Investors need to remain cautious, and it’s not a time to bet big. It’s worth keeping an eye on how the U.S. election is shaping up as well as how the European development is shaping up.”

Valuation Comparison

The MSCI Asia Pacific Index gained 6 percent this year through yesterday as central banks from Europe to the U.S. and Japan took stimulus measures to counter a global economic slowdown and the European debt crisis. The Asian benchmark traded at 12.8 times estimated earnings on average, compared with 13.7 times for the Standard & Poor’s 500 Index and 11.9 times for the Stoxx Europe 600 Index.

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

Futures on the S&P 500 Index (SPXL1) slid 0.3 percent today. The index declined 0.6 percent in New York yesterday as Alcoa Inc. unofficially kicked off an earnings season that is forecast to show 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.

The S&P 500 briefly trimmed losses yesterday after the Federal Reserve said in its Beige Book business survey that the U.S. economy expanded “modestly” last month.

In Japan, a government report today is forecast to show the nation’s machine orders fell 2.3 percent in August after rising 4.6 percent in July, according to economists surveyed by Bloomberg. Japanese machine tool orders fell 3 percent in September from a year earlier, the Japan Machine Tool Builders’ Association said in a preliminary report yesterday.

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. gained for the first time this week, adding 0.4 percent to 92.20 yesterday in New York yesterday.

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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