Japanese Stocks Retreat First Time in Three Days as Oil, Metals Tumble

Japanese stocks fell for the first time in three days as commodities tumbled amid concern that global inflation may curb economic growth.

Inpex Corp. (1605), the nation’s largest oil explorer, slumped 3.6 percent, even after saying full-year profit advanced. Nikon Corp. (7731), a camera maker that gets a quarter of its revenue from Europe, lost 1.9 percent as the euro weakened against the yen on concern European leaders are slowing the drive to grant Greece additional aid. Tokyo Electric Power Co. plunged 8.8 percent after saying fuel rods are fully exposed in the No. 1 reactor at its stricken Fukushima Dai-Ichi nuclear plant.

“Falling commodity prices and concern about European issues are reducing investors’ appetite for risk,” said Kiyoshi Ishigane, a senior strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $84 billion.

The Nikkei 225 (NKY) Stock Average fell 1.5 percent to 9,716.65 at the 3 p.m. close of trading in Tokyo. The broader Topix slid 1 percent to 849.34, with more than four times as many shares declining as advancing. Both gauges fell to the lowest level since April 27.

The Topix Index 12-month price target was reduced by 8 percent to 970 by Goldman Sachs Group Inc. in a report dated yesterday. The brokerage cited a “more muted market recovery” following the March 11 magnitude-9 earthquake and tsunami that devastated Japan’s northeast coast, disabled a nuclear power plant and disrupted supply chains at companies.

Tepco Plunges

Tokyo Electric, operator of the power plant crippled by the temblor, plunged 8.8 percent to 479 yen after the utility said fuel rods are fully exposed at its reactor, setting back its plan to resolve the crisis. Tepco had the second-largest drop in Nikkei 225 after Toho Zinc Co., which forecast lower profit after the quake damaged its factories.

The Topix has tumbled 8.8 percent since March 10, the day before the earthquake. In the period through yesterday’s close, the Standard & Poor’s 500 Index gained 3.6 percent and the Stoxx Europe 600 Index rose 2.1 percent.

The S&P 500 slumped 1.1 percent to 1,342.08 yesterday in New York, its biggest drop since March 16, as commodities tumbled amid a strengthening dollar and inflation concerns.

“The inflation concern is causing investors to avoid risk assets,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “That is the underlying reason for a slump in the commodity market and the weaker euro.”

Oil Tumbles

Oil companies fell the most in the Topix’s 33 industry groups. Inpex slumped 3.6 percent to 563,000 yen even after saying full-year net income rose 20 percent to 128.7 billion yen ($1.6 billion), beating its forecast by 7.2 percent. Japan Drilling Co., an offshore contractor, slipped 2.3 percent to 3,015 yen.

Crude oil for June delivery plunged 5.5 percent to settle at $98.21 a barrel yesterday in New York after an Energy Department report showed that U.S. supplies surged as demand for fuel slipped.

Mitsubishi Corp. (8058), Japan’s biggest commodities trader, slid 2 percent to 2,112 yen and Mitsui & Co., a trading house that counts commodities as its largest source of profit, sank 1.4 percent to 1,391 yen.

Copper yesterday fell to the lowest price in five months after China reported inflation remains above the government’s target, signaling further monetary-policy tightening that may curb metal demand. Consumer prices rose 5.3 percent from a year earlier and banks extended 740 billion yuan ($114 billion) of local-currency loans, according to reports yesterday from the statistics bureau and central bank.

Metal Drops

The London Metal Exchange Index of six metals including copper and aluminum lost 1.9 percent yesterday, its first drop in four days. Gold futures fell in New York as a stronger dollar eroded the appeal of the precious metal as an alternative asset. Silver also slid.

Nikon slipped 1.9 percent to 1,660 yen and Nintendo Co., a video-game console maker that gets a third of its revenue from Europe, sank 2 percent to 18,600 yen.

The euro fell against most major counterparts as speculation that European leaders are slowing the drive to grant Greece additional aid fueled concern the nation may have to restructure debt.

The European currency depreciated to as low as 114.57 yen today in Tokyo, the weakest level since March 28. A weaker euro cuts the value of European income at Japanese companies when converted into their home currency.

Company Earnings

In Japan, this week is the peak for earnings results, with more than 60 percent of the Topix index’s 1,673 companies scheduled to report. Of the 927 companies in the Topix index that have reported results since April 1, 169 have exceeded analysts’ estimates, while 182 have missed them, according to data compiled by Bloomberg.

Toho Zinc, Japan’s third-biggest producer of the metal, plunged 9.5 percent to 391 yen. The company yesterday said it expects a 54 percent drop in net income to 3.5 billion yen this fiscal year on lower production in the wake of the earthquake.

Fujikura Ltd. (5803) , a cable maker, tumbled 8.2 percent to 381 yen after forecasting net income will fall 36 percent, while Citizen Holdings Co., a watchmaker, sank 7.3 percent to 459 yen after predicting a 10 percent drop in operating profit.

Toyota Motor Corp. (7203), the world’s No. 1 carmaker, gained 3.1 percent to 3,370 yen, the biggest support to Nikkei 225 and the most active stock by value in Japan, after public broadcaster NHK said the company will resume normal production in Asia outside Japan. Also, Toyota yesterday said its China factories will resume normal production in mid-June, ahead of its original schedule for as early as November. Automakers were the largest support in the Topix.

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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