July 26 (Bloomberg) -- Japanese stocks dropped, led by trading companies and metals producers, after prices of gold and copper declined.

Mitsubishi Corp., Japan's biggest trading house, declined by the most in almost a month and Sumitomo Metal Mining Co., the nation's largest gold producer, had the largest drop in more than six weeks. Resources-related shares as a group accounted for 15.4 percent of the loss by the Topix index, the largest proportion.

Steelmakers and shipping lines fell, extending indexes' declines in the afternoon, as investors judged recent gains were excessive given their earnings.

``Investors sold shipping lines after the earnings results on the view further gains in share prices are difficult given that all the good news is now out,'' said Yasuhiko Hirakawa, who helps manage the equivalent of $80 billion at DLIBJ Asset Management Co. in Tokyo. ``That raised speculation investors would react similarly to steelmakers and trading company shares, accelerating selling in the afternoon.''

The Nikkei 225 Stock Average dropped 156.33, or 0.9 percent, to 17,702.09. The broader Topix slid 16.85, or 1 percent, to 1,737.18.

Canon Inc. fell on concern its earnings would fail to meet investor expectations.

Nomura Holdings Inc. jumped after the brokerage said its first-quarter profit rose almost fourfold. Nintendo Co. climbed to a record after the company lifted its annual earnings forecast to an all-time high.

Sumitomo Metal Drops

Mitsubishi Corp., which sells industrial metals and fuels, fell 90 yen, or 2.6 percent, to 3,440. Sumitomo Metal slumped 140 yen, or 4.5 percent, to 2,960, the largest drop since June 11. Mitsui & Co., Japan's second-biggest trading company, declined 50 yen, or 1.8 percent, to 2,745.

Gold futures for August delivery declined the most since June 8 yesterday, falling 1.6 percent to $673.80 an ounce in New York. Copper futures for September delivery slid 1.8 percent, the largest drop since June 26.

Kawasaki Kisen Kaisha Ltd., Japan's third-biggest shipping company, dropped 30 yen, or 1.8 percent, to 1,635 after climbing as much as 4 percent. Nippon Yusen, Japan's biggest, added 7 yen, or 0.6 percent, to 1,225, paring its gain of as much as 4.8 percent.

The companies raised their profit forecasts as China's raw material demand more than doubled first-quarter earnings. Nippon Yusen expects net income of 100 billion yen ($830 million) in the year ending March 31, compared with a previous forecast of 82 billion yen. Kawasaki Kisen raised its forecast to 71 billion yen from 63 billion yen.

Mitsui O.S.K. Lines Ltd., which is scheduled to report its results tomorrow, also declined 19 yen, or 1 percent, to 1,832.

`Up Like Crazy'

A measure tracking shipping lines has soared 57 percent so far this year, the best performer among the 33 industry groups included in the Topix.

Nippon Steel, which had climbed 7.3 percent this month to yesterday, fell 27 yen, or 2.9 percent, to 904. Marubeni Corp., which soared 15 percent during the same period, slid 47 yen, or 4 percent, to 1,123.

``Steelmakers and trading companies were up like crazy this month so concern over the U.S. housing market and the currency market triggered a selling of those shares,'' said Hideo Arimura, who helps manage $26 billion at Mizuho Asset Management Co. in Tokyo.

Canon Inc. led losses by technology-related shares on concern the company's results would not be as strong as people expected, said DLIBJ's Hirakawa. The stock fell 160 yen, or 2.3 percent, to 6,890.

``I've heard some investors saying they worry about Canon earnings because results by its subsidiaries weren't so good,'' DLIBJ's Hirakawa said.

Canon's Earnings

Canon, the world's No.1 digital camera maker, said after the market closed its net income climbed 17 percent to 123.9 billion yen in the quarter ended June 30 as a weaker yen increased the value of overseas sales. Meanwhile, the company cut its full-year net income forecast by 0.9 percent to 500 billion yen, citing a change in accounting for asset depreciation that will increase costs by about 67 billion yen.

Nomura, Japan's largest brokerage, jumped 140 yen, or 6.6 percent, to 2,260, the biggest gain since December 2005. Nintendo, the maker of the top-selling Wii game console, surged 5,000 yen, or 8.8 percent, to a record 61,800 in Osaka.

Nomura said yesterday after the market closed net income rose to 76.7 billion yen for the three months ended June 30 from 20.1 billion yen a year earlier. Profit was boosted as the brokerage earned more from trading stocks and managing assets.

Nintendo, Juki

Nintendo raised its annual earnings forecast to a record yesterday. The profit revision came after its net income expanded fivefold to 80.3 billion yen in the first quarter, from 15.6 billion yen a year earlier. Sales, bolstered by its handheld DS portable player and the ``Mario'' games series, more than doubled to a record 340.4 billion yen.

Among other companies that reported earnings yesterday, Nippon Electric Glass Co. tumbled 400 yen, or 17 percent, to 1,905, the largest slide since Oct. 10, 1987. The maker of fluorescent light tubes and precision sheet glass said net income dropped 44 percent in the first quarter because of increasing fuel costs.

Juki Corp., the world's No. 1 maker of industrial sewing machines, jumped 100 yen, or 12 percent, to 966. The company said its quarterly net income jumped 56 percent to 3.17 billion yen on rising demand for high-value-added sewing machines in China.

Nikkei futures expiring in September declined 0.9 percent to 17,700 in Osaka and fell 1 percent to 17,680 in Singapore.

To contact the reporter for this story: Makiko Suzuki in Tokyo at Msuzuki13@bloomberg.net

Last Updated: July 26, 2007 03:19 EDT