Stocks Decline the Most Since February on Goldman, Commodities Prices, Yen

Japanese stocks fell the most since February after U.S. securities regulators accused Goldman Sachs Group Inc. of fraud, commodity prices slid and the yen climbed.

Almost 10 times as many shares declined as advanced. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, sank 3.5 percent. Canon Inc., a camera maker that gets about 28 percent of its sales in the Americas, lost 2.3 percent. Mitsui & Co., a trading company that counts commodities as its biggest source of profit, slid 3.6 percent.

“The timing of the accusations against Goldman was perfect for investors seeking to sell shares, since markets worldwide had been overheating,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of about $66 billion.

The Nikkei 225 Stock Average fell 1.7 percent to 10,908.77 at the 3 p.m. close in Tokyo. The broader Topix index lost 1.8 percent to 970.84, its biggest drop since Feb. 5.

The 25-day Toraku index, a measure of daily stock winners and losers in Tokyo, has held above 120 since March 17. Some traders consider a level of more than 120 as a signal the market is overheating. A surge in Dai-ichi Life Insurance Co.’s shares on their first day of trading and a weaker yen had encouraged investors to buy Japanese stocks.

Today’s drop cut the price of stocks in the Topix to 19.6 times estimated earnings on average, compared with 14.8 times for the MSCI World Index of 23 developed countries. The Japanese gauge has risen 7 percent this year, the biggest increase among benchmarks for the world’s 15 largest equity markets.

‘Goldman Shock’

Futures on the Standard & Poor’s 500 Index fell 0.5 percent after the U.K. and Germany signaled inquiries into Goldman Sachs. The index dropped 1.6 percent in New York on April 16, the most since Feb. 4, after the Securities and Exchange Commission accused the New York-based investment bank of fraud related to packaging and selling collateralized-debt obligations linked to subprime mortgages. Goldman Sachs tumbled 13 percent on April 16.

“The Goldman shock is discouraging investors from taking on risk in stocks, currencies and commodities,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. in Tokyo.

Sumitomo Mitsui fell 3.5 percent to 3,175 yen. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, lost 3.1 percent to 498 yen. Nomura Holdings Inc., the nation’s largest brokerage, slid 2.8 percent to 669 yen.

“Stocks may continue to slump if the allegations against Goldman prompt financial regulators globally to tighten rules,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which manages about $94 billion.

Foreign Exchange, Commodities

Canon, the world’s biggest maker of digital cameras, fell 2.3 percent to 4,250 yen. Toyota Motor Corp., a carmaker that gets 43 percent of its revenue in North America and Europe, slipped 1.9 percent to 3,625 yen. Mitsubishi UFJ, Toyota, Sumitomo Mitsui, Canon and Mitsui & Co. were the biggest drags on the Topix.

The rising yen further weighed on stocks, reducing the value of overseas income at Japanese companies when converted into their home currency. The yen rose to as much as 91.82 against the dollar, its strongest level since March 25, from 92.74 at the close of stock trading in Tokyo on April 16. It appreciated to as much as 123.70 against the euro from 125.48.

“Japan doesn’t have any power to boost the economy by itself,” said Ishigane. “The U.S. market has a big impact on the stock market in Japan, whose economy depends on exports.”

Mitsui & Co., Japan’s second-biggest trading company by market value, declined 3.6 percent to 1,560 yen. Inpex Corp., the nation’s largest oil and gas explorer, sank 3.1 percent to 688,000 yen.

Crude oil for May delivery lost 1.8 percent today, adding to a 2.7 percent decline on April 16. The London Metal Exchange Index of six industrial metals, including copper and zinc, fell 2.1 percent on April 16, its biggest drop since Feb. 25.

Komatsu Ltd., a maker of construction machinery that counts China as its fastest-growing market, fell 2.2 percent to 1,876 yen. Hitachi Construction Machinery Co. declined 2.8 percent to 2,140 yen. They dropped after China told banks to stop loans on purchases of third homes to cool its economy.

To contact the reporter for this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.