Oct. 6 (Bloomberg) -- Japan's stocks dropped, driving the Topix index below 1,000 points for the first time since December 2003, after the global credit crisis deepened in Europe and the yen jumped, cutting the value of overseas sales.

Mitsubishi UFJ Financial Group Inc. plunged 9.2 percent after worsening credit conditions forced new bailouts of Hypo Real Estate Holding AG and Fortis. Nintendo Co., which gets 80 percent of its sales from overseas markets, lost 8 percent as the yen surged to its highest versus the euro since May 2006. Nippon Steel Corp. sank 7.8 percent on concern demand will wane.

``This is probably the worst market I've ever seen,'' said Hideo Arimura, who oversees the equivalent of $1.9 billion at Mizuho Asset Management Co. ``It's totally dark and there's nothing that prompts investors to buy stocks.''

The Topix fell 48.92, or 4.7 percent, to close at 999.05 in Tokyo. Only 93 of 1,714 members included in the index rose. The Nikkei 225 Stock Average declined 465.05, or 4.3 percent, to 10,473.09.

The Nikkei lost 8 percent last week, its biggest drop since August 2007, on concern the passage of a $700 billion bank bailout by the U.S. will fail to stimulate demand for Japan's exports. The benchmark is down 32 percent this year, set for its second straight annual drop.

Mitsubishi UFJ, Japan's largest listed bank, lost 9.2 percent to 806 yen, the steepest plunge since October 2003, while Resona Holdings Inc., the fourth biggest, plummeted 9.5 percent to 119,800 yen.

Europe Growth

Germany agreed on a $68 billion plan for commercial property lender Hypo and BNP Paribas SA, France's biggest lender, said it will take over Fortis in Belgium and Luxembourg. The bailouts in Europe follow failures in the U.S., including Bear Stearns Cos. and Lehman Brothers Holdings Inc. that spurred the $700 billion rescue package.

Growth in Europe is likely to slow to 0.4 percent next year from the previously estimated 0.9 percent expansion, HSBC Holdings Plc said in a report dated on Oct. 3, adding to evidence the credit crisis triggered by the collapse of the U.S. mortgage market is spreading among financial businesses outside of the U.S.

Chiba Bank Ltd. plummeted 13 percent, the most since October 1987, to 473 yen. The regional lender slashed its full-year earnings target on Oct. 3 by 64 percent, saying rising bankruptcies among developers prompted the bank to boost its loan-loss provision.

Euro, Dollar

Nintendo, the world's biggest maker of handheld game players, sank 8 percent to 33,800 yen in Osaka trading, extending its losing streak to a ninth day, the longest since December 2002. Sony Corp., the world's second-biggest maker of consumer electronics, tumbled 6.6 percent to 2,810 yen.

The yen strengthened to as much as 139.96 to the euro today, its strongest since March 28, 2006. The Japanese currency reached a four-month high of 102.85 against the dollar. A stronger yen reduces the value of Japanese companies' overseas sales when converted to local currency.

Nippon Steel, the world's second-biggest maker of the metal, dived 7.8 percent to 319 yen. JFE Holdings Inc., Nippon Steel's biggest Japanese rival, plunged 7.2 percent to 2,625 yen. A gauge of steelmakers has lost half its value so far this year as the credit crisis and slowing economy dragged down U.S. auto sales.

Nippon Steel also declined on concern it will post losses on stock it holds in smaller steelmakers such as Sanyo Special Steel Co., which sank 15 percent to 376 yen today.

Developers Drop

``Steel producers and machinery makers are among businesses whose fundamentals are likely to deteriorate,'' said Mizuho Asset's Arimura. ``People feel a risk that a worsening economy will diminish demand for capital goods.''

Komatsu Ltd., the world's second-biggest maker of earthmoving equipment, dropped 9.3 percent to 1,252 yen. Hitachi Construction Machinery Co. declined 8.1 percent to 1,814 yen.

Japan government reports have shown industrial production fell at the fastest pace in five years in August, household spending dropped for a sixth month and the jobless rate reached a two-year high.

Developers fell after UBS AG said real estate financing will weaken. NTT Urban Development Corp. tumbled 16 percent to 102,200 yen, the worst slump since it went public in November 2004. Mitsui Fudosan Co., Japan's biggest real-estate company, lost 5.9 percent to 1,761 yen, and Mitsubishi Estate Co. , the second largest fell 4.5 percent to 1,860 yen. Sumitomo Realty & Development Co., the third biggest, slid 5.9 percent to 1,934 yen. UBS cut its ratings on the companies to ``neutral'' from ``buy.''

Sumitomo Metal

``Credit costs could rise further, and we would therefore expect real estate financing to decline through around March 2009 at least,'' Toshihiko Okino, a Tokyo-based analyst for UBS, wrote in a note to clients dated Oct. 3. Bankruptcies of real-estate companies are likely to continue owing to credit turmoil, he said.

Sumitomo Metal Mining Co., Japan's biggest nickel producer, sank 7.1 percent to 853 yen, having lost 30 percent of its value in nine days. Nippon Mining Holdings Inc., the nation's largest copper producer, lost 7 percent to 348 yen.

On Oct. 3, nickel for three-month delivery slid 1 percent to the lowest since March 2006 in London. Copper for December delivery lost 4 percent in Shanghai today.

Nikkei futures expiring in December retreated 4.7 percent to 10,450 in Osaka and slumped 4.4 percent to 10,495 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

Last Updated: October 6, 2008 04:08 EDT