Topix Falls to 1-Month Low on Greek Debt Concern, U.S. Manufacturing Data

Most Japanese stocks fell, sending the Topix index to the lowest level since April 19, as Greece seeking more bailout funds and slower-than-estimated manufacturing growth in the New York region fueled concerns about the global economic recovery.

Toyota Motor Corp. (7203), the world’s No. 1 carmaker, slid 1.1 percent. Tokyo Electric Power Co., operator of the nuclear plant crippled by the March 11 earthquake and tsunami, plunged 9.5 percent after Moody’s Japan K.K. downgraded ratings on the company’s debt. Sumitomo Mitsui Financial Group Inc. (8316) and other banks fell after the finance minister said creditors need to help support Tepco while it brings the power station under control. Sony Corp. (6758), Japan’s No. 1 electronics exporter, gained 1.5 percent after the yen weakened, boosting earnings outlook for exporters.

“The European debt issue is reheating and the momentum of U.S. economic growth may slow,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $28 billion. “It’s uncertain what the impact” of the Tepco issue will be, he said “That’s bad for the market.”

The Topix index fell 0.1 percent to 828.85 at the close in Tokyo, with about three shares dropping for every two that gained. The Nikkei 225 (NKY) Stock Average rose 0.1 percent to 9,567.02 yen, after swinging between gains and losses.

The Topix has tumbled 11 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.

New York Manufacturing

The Standard & Poor’s 500 Index lost 0.6 percent yesterday in New York as a report showed manufacturing growth in the New York region cooled and Greece sought additional bailout funds.

Toyota retreated 1.1 percent to 3,305 yen and smaller rival Honda Motor Co. fell 0.3 percent to 3,120 yen. Toyota and Honda were the heaviest drags on Topix.

Manufacturing in the New York region expanded at a slower pace than anticipated in May as the cost of raw materials surged. The Federal Reserve Bank of New York’s general economic index fell to 11.9 from a one-year high of 21.7 in April, the central bank reported yesterday. Economists in a Bloomberg News survey projected it would drop to 19.6, according to the median forecast. Readings greater than zero signal growth.

Europe Debt

“Optimism on the U.S. economy is receding and Greek financial issues remain uncertain,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Investors will likely keep shifting their funds to safe bonds or cash from risk assets like stocks.”

European finance chiefs endorsed a 78 billion-euro ($111 billion) bailout for Portugal. Authorities stepped up pressure on Greece to sell assets and deepen spending cuts to win an increase of its 110 billion-euro aid package and more time to repay the loans.

A Greek default would be “highly destabilizing” for banks, causing losses that “far exceed” the size of their loans and investments there, according to Moody’s Investors Service.

Tepco Plunges

Tokyo Electric, known as Tepco, plunged 9.5 percent to 380 yen, the steepest drop in the Nikkei 225, after Moody’s Japan K.K. yesterday downgraded its senior secured debt to Baa2 from Baa1 while rerating its short-term commercial paper to Not Prime from Prime 2. Moody’s kept Tepco on review for a further possible downgrade. Also, Kyodo News reported Tepco will report a net loss of more than 800 billion yen ($9.9 billion) for the fiscal year ended March 31. Tepco said it wasn’t the source of the report on its earnings.

Utilities were the biggest drag on the Topix among its 33 industry groups today, followed by banks.

Sumitomo Mitsui fell 0.8 percent to 2,381 yen and its smaller rival Mizuho Financial Group Inc. (8411), Japan’s third-biggest publicly traded lender, lost as much as 1.6 percent after Japan Finance Minister Yoshihiko Noda, said today in Tokyo the government wanted co-operation between Tokyo Electric Power and its creditors as part of a plan to tackle worse-than-estimated damage to the Fukushima Dai-Ichi facility.

MSCI Reshuffles

Sapporo Holdings Ltd. (2501), Japan’s fourth-largest brewer, slid 3.3 percent to 297 yen and Mitsui Mining & Smelting Co. retreated 3.6 percent to 270 yen after MSCI Inc. said on its website they were among 20 companies that will be removed from the benchmark MSCI Japan Index. The changes will be effective as of the close trading on May 31.

Electronics makers were the biggest contributor to support the Topix.

Sony, which gets about 70 percent of its revenue overseas, gained 1.5 percent to 2,275 yen. Canon Inc. (7751), the world’s biggest camera maker, increased 0.3 percent to 3,725 yen, erasing earlier losses.

The yen depreciated to as low as 81.46 against the dollar in Tokyo, compared with 80.86 at today’s opening of stock trading. Against the euro, Japan’s currency weakened to 115.54 from 114.39. A weaker yen boosts overseas income at Japanese companies when converted into their home currency.

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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