Nikkei 225, Topix Tumble the Most in Six Months as Crude Surges Above $100

Japan’s benchmark stock indexes fell the most in six months as escalating tension in the Middle East drove oil above $100 a barrel, reigniting concern energy costs will slow the global economic recovery.

Asahi Glass Co. lost 4.3 percent as higher crude prices sparked concern the glassmaker’s costs will rise. Toyota Motor Corp., the world’s largest carmaker, retreated 2.9 percent as speculation mounted turmoil in the Middle East will spread from Libya to Iran. Sharp Corp., a maker of flat-screen panels, led declines on the Nikkei 225 Stock Average after Morgan Stanley cut the company’s rating.

The Nikkei tumbled 2.4 percent to 10,492.38 at the 3 p.m. market close in Tokyo, the first drop in four days. The broader Topix index fell 2 percent to 944.07, with all of the index’s 33 industry groups retreating. Both gauges had their largest declines since Aug. 31.

“Investors are looking to avoid risky assets and sentiment is becoming more negative,” said Naoki Fujiwara, who helps oversee $6 billion in Tokyo at Shinkin Asset Management Co. “The military risks in Libya seem to be increasing. If war breaks out, there will be some impact on oil-related facilities and the turmoil may spread to neighboring areas.”

Photographer: Tomohiro Ohsumi/Bloomberg

The Nikkei 225 Stock Average fell 1.2 percent to 10,620.21 as of 9:07 a.m. in Tokyo. Close

The Nikkei 225 Stock Average fell 1.2 percent to 10,620.21 as of 9:07 a.m. in Tokyo.

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Photographer: Tomohiro Ohsumi/Bloomberg

The Nikkei 225 Stock Average fell 1.2 percent to 10,620.21 as of 9:07 a.m. in Tokyo.

The Topix increased 7.2 percent this year through yesterday, the most among major Asia-Pacific benchmark indexes. Stocks in the Japanese benchmark are valued at 16.2 times estimated earnings on average, compared with 13.6 times for the Standard and Poor’s 500 Index and 11.3 times for the Stoxx Europe 600.

Surging Oil Prices

“The environment has been good for the market, but it’s possible the surge in oil prices could totally change the situation,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo.

Futures on the Standard & Poor’s 500 Index slid 0.3 percent today. The index fell 1.6 percent yesterday in New York as concern over surging oil prices overshadowed a report showing U.S. manufacturing grew at its fastest pace in almost seven years last month.

“Uncertainty about the future of the global economy is resurfacing,” said Hiroichi Nishi, an equities manager in Tokyo at Securities Inc. “There’s concern inflation will accelerate in emerging nations and higher costs will hurt profits at manufacturers.”

Makers of glass and chemical products declined as higher oil prices raised material costs. Asahi Glass lost 4.3 percent to 1,113 yen, while Nippon Electric Glass Co. slumped 4.2 percent to 1,334 yen. Shin-Etsu Chemical Co., which produces synthetic resins and silicon wafers used to make semiconductors, fell 3.7 percent to 4,550 yen.

Oil Jumps

Crude oil for April delivery gained as much as $1.01 to $100.64 a barrel in electronic trading on the New York Mercantile Exchange, and was at $100 at 2:25 p.m. Sydney time. Libyan rebels yesterday braced for renewed clashes with forces loyal to leader Muammar Qaddafi and Al Arabiya television reported Iranian protesters clashed with security forces in Tehran.

U.S. Defense Secretary Robert Gates said yesterday two ships and 400 Marines are en route to the Mediterranean Sea near Libya to help with humanitarian relief and evacuations.

“Oil prices are likely to be very volatile for the time being and investors are going to be glued to the situation,” Nikko Cordial’s Nishi said. “Democratic movements are spreading and there’s no quick fix to these conflicts.”

Yen Strengthens

Toyota fell 2.9 percent to 3,745 yen and was the heaviest single drag on the Topix. Nintendo Co., a videogame maker that gets about 85 percent of its sales outside of Japan, dropped 3.7 percent to 23,290 yen. Sharp plunged 4.8 percent to 846 yen after Morgan Stanley downgraded the stock to “equalweight” from “overweight,” citing a failure to cut costs amid a likely slump in demand for large-screen panels.

The yen appreciated to 81.79 against the dollar today, compared with 82.20 at the close of stock trading in Tokyo yesterday. Against the euro, Japan’s currency strengthened to 112.54 from 113.48. A stronger yen reduces income at Japanese companies when overseas revenue is converted into their home currency.

Yahoo Japan Corp. was one of only two stocks that rose in the Nikkei. The stock climbed 3.7 percent to 32,300 yen after Reuters reported that Yahoo Inc. is in talks to sell its 35 percent stake in the Japanese Internet portal to Softbank Corp.

Showa Shell Sekiyu K.K., an oil refiner, gained 5.7 percent to 786 yen, the most since June 2009.

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

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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