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Japan Stocks Decline First Day in Four on U.S. Economy, Crude Oil Prices

Japanese stocks fell for the first time in four trading days as slower growth in U.S. service industries, rising jobless claims and the biggest plunge in commodity prices in almost two years fueled concern the global economy is stalling.

Toyota Motor Corp. (7203), the world’s largest carmaker, sank 2.4 percent. Canon Inc. (7751), a camera maker that gets more than 80 percent of its revenue overseas, lost 2.3 percent after the yen rose, cutting the earnings outlook for exporters. Inpex Corp. (1605), the nation’s No. 1 oil and gas explorer, plunged 6.2 percent.

The Nikkei 225 Stock Average fell 1.5 percent to 9,859.20 at the 3 p.m. close of trading in Tokyo, the steepest drop since April 12. The broader Topix lost 1.1 percent to 856.50, with about five shares dropping for every three that gained. Japanese markets were closed the past three days for national holidays.

“Investors’ optimism about a sustained economic recovery may be waning after the U.S. economic data,” said Hideo Arimura, who helps oversee about $2.2 billion at Mizuho Asset Management Co. in Tokyo. “They may want to take profits.”

The Topix has lost 8 percent since March 10, the day before a magnitude-9 earthquake and tsunami devastated Japan’s northeast coast, disabled a nuclear power plant and disrupted supply chains at companies from Toyota to Canon. In the period through yesterday’s close, the Standard & Poor’s 500 Index gained 3.1 percent, while the Stoxx Europe 600 Index fell less than 0.1 percent.

U.S. Economic Data

The Standard & Poor’s 500 Index dropped for a fourth day, falling 0.9 percent to 1,335.10 yesterday in New York.

Service industries in the U.S. expanded in April at the slowest pace in eight months as companies cut back in response to higher energy costs, according to the Institute for Supply Management’s index of U.S. non-manufacturing companies published on May 4.

Applications for jobless benefits unexpectedly jumped by 43,000 to 474,000 in the week ended April 30, the most since August, Labor Department figures showed yesterday.

Also, U.S. consumer confidence dropped last week to the lowest level in more than a month as rising fuel costs squeezed American household budgets. The Bloomberg Consumer Comfort Index decreased to minus 46.2 in the week ended May 1, the lowest level since the end of March, from minus 45.1 the prior period.

Toyota, Fuji Heavy

Toyota slipped 2.4 percent to 3,210 yen. Fuji Heavy Industries Ltd. (7270), the maker of Subaru cars, lost 2.1 percent to 602 yen. Honda Motor Co., an automaker that gets more than 80 percent of its sales abroad, sank 4.7 percent to 3,075 yen after the National Business Daily reported the company halted production at a parts unit in China after the earthquake disrupted supplies.

Carmakers were the heaviest drag on the Topix among its 33 industry groups, followed by electronics manufacturers. Canon, the world’s biggest camera maker, retreated 2.3 percent to 3,805 yen. Fanuc Corp. (6954), a manufacturer of industrial robots that earns about 75 percent of its revenue overseas, slipped 2.8 percent to 13,160 yen.

Commodities dropped yesterday by the most in almost two years, paring this year’s gains to 8.2 percent, on concern that economic growth will slow as central banks seek to cool inflation by raising borrowing costs.

Oil, Metals

Oil companies had the biggest decline in the Topix among its 33 industry groups. Inpex plunged 6.2 percent to 563,000 yen, the steepest drop in the Nikkei 225, followed by Toho Zinc Co., Japan’s third-largest producer of the metal, which tumbled 5.2 percent to 423. Japan Petroleum Exploration Co. (1662), the nation’s second-largest oil explorer, retreated 3.6 percent to 3,760 yen. Sumitomo Metal Mining Co., Japan’s No. 2 copper smelter, lost 3.9 percent to 1,390 yen.

Crude oil for June delivery plunged 8.6 percent to $99.80 a barrel yesterday, the lowest settlement in New York since March 16. The London Metal Exchange Index of six metals including copper and aluminum sank for a second day, falling 4 percent yesterday, the biggest drop since November 16.

European Central Bank President Jean-Claude Trichet signaled yesterday the bank will wait until after June to raise interest rates again, wrong-footing some investors who had expected a quicker move to fight inflation. The euro plunged.

Japan’s currency yesterday climbed versus all of its 16 most-traded peers and reached 79.57 against the dollar last night in Tokyo, the highest level since March 18, as falling commodities prompted investors to unwind bets in higher-yielding assets financed with yen. Against the euro, Japan’s currency appreciated to 116.15 today from 120.66 at the close of stock trading on May 2. A stronger yen cuts the value of overseas income at Japanese companies when repatriated.

Nuclear Damages

“It’s very negative for Japanese companies that the yen is getting stronger than the level they had assumed as their earnings faltered in the wake of the earthquake,” Mizuho Asset’s Arimura said, adding many companies assumed a level of 80 yen or 82 yen against the dollar.

Tokyo Electric Power Co., owner of the Fukushima Dai-Ichi nuclear plant crippled by the March 11 earthquake and tsunami, soared 6.8 percent to 455 yen, the biggest gain in the Nikkei 225 (NKY), after Asahi newspaper reported on May 3 the government estimated that total damages to be paid to victims of the disaster would amount to 4 trillion yen ($50 billion). The total may include about 2 trillion yen by Tokyo Electric, which is expected to raise electricity prices to help pay for compensation, the report said.

Japan’s Chief Cabinet Secretary Yukio Edano today said the Cabinet hasn’t discussed allowing the utility to increase electricity fees to help pay compensation from the accident at the nuclear plant.

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

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

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