Japanese stocks fell, halting a three-day gain, as Sharp Corp. dropped on speculation the electronics maker will seek a bailout after forecasting a record loss and as commodity prices fell.
Sharp lost 6.7 percent. Mitsui Mining & Smelting Co. lost 2.9 percent. Yamada Denki Co. (9831) sank 7.5 percent after the electronics retailer cut its earnings forecast. Utilities fell after a regulator delayed a decision on whether to take reactors at a Kansai Electric Power Co. plant offline. Toyota Motor Corp. (7203) rose 2.2 percent after South Korea’s Hyundai Motor Co. and Kia Motors Corp. overstated fuel-economy estimates for some of their models.
“Japan’s corporate earnings are clearly bad, dragging down the markets,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees about $75 billion. “Commodities declined because investors had expected stimulus measures to boost the global economy by providing liquidity but it isn’t improving as much as expected.”
The Nikkei 225 Stock Average (NKY) fell 0.5 percent to 9,007.44 at the 3 p.m. close in Tokyo, with volume almost 20 percent below the 30-day average ahead of tomorrow’s U.S. presidential election. The broader Topix (TPX) Index lost 0.6 percent to 747.95, with more than two shares dropping for each that gained.
The Topix has risen 4 percent since Sept. 6 after the European Central Bank started a global wave of stimulus to boost growth, with the U.S. Federal Reserve and the Bank of Japan following suit. Shares on the equity gauge traded at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index.
Futures on the S&P 500 added 0.2 percent. The gauge fell 0.9 percent at the end of last week even after U.S. employers added more workers than expected in October. President Barack Obama is leading Republican challenger Governor Mitt Romney by 3 points, according to an Oct. 31-Nov. 3 Pew Research Center survey.
Commodity related companies declined after crude oil for December delivery sank 2.6 percent to $84.86 a barrel in New York on Nov. 2, the lowest settlement since July 10. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum yesterday slumped 1.7 percent on Nov. 2, the biggest drop since Oct. 19.
Mitsui Mining sank 2.9 percent to 165 yen. Inpex Corp., Japan’s largest oil explorer by market value, slid 1.3 percent to 434,500 yen.
“Judging from the current real economy, the conditions aren’t there for commodity prices to rise,” said Kenichi Hirano, general manager and strategist at Tachibana Securities in Tokyo. “In Japan, many companies cut their earnings forecasts, discouraging investors to buy shares.”
Japan’s earnings season peaked last week, with 570 of the 1,675 Topix companies reporting results. Of the 240 companies on the Topix which have reported quarterly revenue since Oct. 1 and for which Bloomberg News has estimates, 65 percent have missed projections.
Yamada Denki sank 7.5 percent to 3,170 yen after cutting its net income forecast 40 percent to 34 billion yen ($422 million), citing slumping demand for televisions and digital recorders.
Ebara Corp. (6361) plunged 9.8 percent to 294 yen, the most on the Nikkei 225. The pump maker today said its loss more than tripled to 1.05 billion yen in the six months ended Sept. 30, with a 7 percent drop in sales. The company cut its full-year profit forecast 19 percent to 10.5 billion yen.
Utilities declined after Japan delayed a decision on the future of Kansai Electric’s Ohi nuclear plant as seismologists under the Nuclear Regulation Authority conflicted over whether a fault line under the site is active or not.
Kansai Electric tumbled 6.8 percent to 575 yen. Hokkaido Electric Power Co. fell 4.5 percent to 640 yen.
Sharp slid 6.7 percent to 154 yen after Fitch Ratings lowered the electronics maker’s long-term issuer default rating to B- from BBB-, keeping a negative outlook. With 200 billion yen of convertible bonds maturing in 2013, Sharp may have to ask the state Enterprise Turnaround Initiative Corp. or Innovation Network Corp. of Japan for money, said Fumiaki Sato, co-founder of Sangyo Sosei Advisory Inc.
Among companies that gained, Toyota rose 2.2 percent to 3,210 yen. The U.S. Environmental Protection Agency said on Nov. 2 that Hyundai and Kia overstated estimates of fuel economy on various models, and must re-label the window stickers. At the close of market today, Toyota raised its full-year profit forecast as rising demand for the Prius hybrid in the U.S. and Japan helped make up for slumping sales in China.
Minebea Co. (6479) gained the most on the Nikkei 225, rising 7.3 percent to 279 yen. Nomura Holdings Inc. said in a daily note the bearing maker is undervalued, maintaining its buy rating. On Nov. 2, the company cut its full-year net-income forecast 41 percent to 7.4 billion yen, citing slumping sales of products used for disk drives and cars.
The Nikkei Stock Average Volatility Index (VNKY) climbed 3.5 percent to 19.06, indicating that traders expect a swing of 5.5 percent on the equity benchmark in the next 30 days.
-- With assistance from Toshiro Hasegawa in Tokyo. Editors: Jim Powell, Jason Clenfield
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