Japan's Topix Falls the Most in Five Weeks on U.S. Retail Sales, Fed View

Japanese stocks fell, dragging down the Topix index by the most in five weeks, as concern mounted that a global economic recovery will stall after U.S. retail sales declined and the Federal Reserve cut its growth forecast.

Nissan Motor Co., a carmaker that counts North America as its biggest market, retreated 3.3 percent. Canon Inc., which is the world’s largest maker of cameras and gets about 80 percent of its revenue outside Japan, lost 2.5 percent. Nippon Yusen K.K., Japan’s biggest shipping line, slumped 2.6 percent on lower cargo rates. Resona Holdings Inc. plunged 5.3 percent on speculation the bank will sell shares.

“The worst is already behind us, but the strength of the recovery is weak,” said Masayuki Kubota, a fund manager at Tokyo-based Daiwa SB Investments Ltd., which oversees about $51 billion in assets. “Concerns remain about the future once support from economic measures expires.”

The Topix sank 1.6 percent to 856.60 at the 3 p.m. close in Tokyo, its biggest drop since June 7. About eight stocks retreated for each that advanced. The Nikkei 225 Stock Average fell 1.1 percent to 9,685.53. Both gauges closed yesterday at their highest levels since June 24.

The Topix declined the most among benchmark indexes in the Asia-Pacific region. It has decreased 5.6 percent this year on concern that Europe’s government-debt crisis and China’s moves to cool inflation will hamper a global economic recovery. Stocks in the gauge trade at 16.7 times estimated earnings on average. They were at 16.1 times on July 1, the lowest level since 2008.

Retail Sales, Fed

In New York yesterday, the Standard & Poor’s 500 Index slipped less than 0.1 percent as the decline in retail sales and the Federal Reserve’s outlook overshadowed a forecast for record profit by Intel Corp.

Canon lost 2.5 percent to 3,490 yen today. Sony Corp., an electronics maker that gets 22 percent of sales in the U.S., fell 2.4 percent to 2,530 yen. Nissan sank 3.3 percent to 648 yen. Honda Motor Co., a carmaker that derives almost 85 percent of its sales abroad, dropped 2.2 percent to 2,682 yen.

Electronics companies were the biggest drag on the Topix among the index’s 33 industry groups, followed by banks and carmakers. All but one group fell today.

Sales at U.S. retailers dropped 0.5 percent in June, more than projected, after declining 1.1 percent in May, Commerce Department figures showed yesterday in Washington.

‘Economic Outlook Softened’

“The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside,” according to minutes released yesterday of a June meeting of Federal Reserve officials. U.S. central bankers lowered their central tendency forecast for 2010 growth to a range of between 3 percent and 3.5 percent versus 3.2 percent to 3.7 percent in April, the minutes showed.

Equities briefly pared losses today after reports from China showed slowing economic expansion and inflation, boosting speculation the government won’t seek to curb growth further. Declines accelerated this afternoon as concern increased that slowing expansion will jeopardize a worldwide economic recovery.

The strengthening yen further hurt stocks, reducing overseas income at Japanese companies when converted into their home currency. The yen appreciated to as much as 88.02 against the dollar today in Tokyo, compared with 88.92 at the close of stock trading yesterday. Against the euro, it strengthened to 112.06 from 112.99.

Resona Holdings tumbled 5.3 percent to 975 yen, the biggest drop in the Nikkei 225, on speculation the bank will sell shares to repay government funds. A spokesman for the lender declined to comment.

Resona Rumor

“There is a rumor Resona may be trying to raise capital to pay off the government,” said Ismael Pili, a Tokyo-based analyst at Macquarie Group Ltd. “The rumor is gaining momentum.”

Shipping lines had the second-biggest percentage decline among the Topix’s industry groups. Nippon Yusen slumped 2.6 percent to 332 yen. Mitsui O.S.K. Lines Ltd., which operates the world’s largest merchant fleet, lost 3.6 percent to 590 yen, the most since May 25. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, lost 2.9 percent to 368 yen.

The Baltic Dry Index of freight rates to ship bulk commodities plunged 4.5 percent yesterday in London in its 34th consecutive decline, the longest losing streak since August 2001.

“Investors are trying to avoid risks,” said Takero Inaizumi, head of equity research in Tokyo at Mizuho Investors Securities Co. “Market participants are still concerned the global economy may head into a double dip after economic- stimulus measures expire.”

To contact the reporter for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.

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