Nikkei 225 Drops as U.S. Manufacturing Sputters; Tokyo Electron Slides

Japan’s Nikkei 225 (NKY) Stock Average fell, paring yesterday’s gains, as U.S. manufacturing grew at the slowest pace in two years, pushing down Asian exporters even after lawmakers in Washington approved legislation to raise the nation’s debt limit before a threatened default.

Nikon Corp. (7731), a camera maker that counts North America as its biggest market, declined 2.9 percent. NTN Corp. (6472), a bearing maker, slumped 5.7 percent. Tokyo Electron Ltd. (8035), a maker of semiconductor equipment maker that yesterday slashed its profit forecast and dividend, plunged 6.2 percent.

The Nikkei 225 fell 1.2 percent to 9,844.59 at the 3 p.m. close in Tokyo. The gauge yesterday climbed the most in a month on signs congressional leaders were ready to strike a deal on raising the U.S. government’s borrowing authority. The broader Topix index dropped 0.9 percent today to 843.96.

The U.S. manufacturing report showed “the economy is slowing globally, and that heightens uncertainties about the outlook of earnings at companies expecting recovery in the second-half period,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo.

The Standard & Poor’s 500 Index lost 0.4 percent in New York yesterday as slower-than-forecast growth in manufacturing erased a rally triggered by speculation lawmakers would raise the federal debt ceiling.

House Votes

Futures on the index slid 0.3 percent today after the House approved legislation to raise the debt limit one day before a threatened default.

The House voted 269-161 for the plan negotiated by leaders and President Barack Obama over the weekend. The agreement, approved by the House and set to be considered in the Senate, would cut the federal deficit while raising the nation’s debt ceiling by $2.1 trillion. The deal contains $917 billion in spending cuts, with the balance to come later this year from a special committee of lawmakers.

Exporters and makers of machinery and parts dropped after a report showed U.S. manufacturing expanded in July at the slowest pace in two years, indicating the industry that’s been driving the economic expansion is starting to weaken. The Institute for Supply Management’s factory index fell to 50.9 last month from 55.3 in June. Economists projected the index would drop to 54.5, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion.

Nikon, Olympus

Nikon retreated 2.9 percent to 1,808 yen. Olympus Corp. (7733), an optical-equipment maker which gets more than 20 percent of its revenue in North America, dropped 1.5 percent to 2,711 yen. Kyocera Corp. (6971), a manufacturer of solar panels that gets 17 percent of its sales in the U.S., lost 1.2 percent to 8,230 yen.

Makers of factory equipment and machinery parts declined as a group by the most since May 23. NTN slumped 5.7 percent to 448 yen. SMC Corp., a maker of pneumatic equipment and controls, tumbled 4.8 percent to 14,010 yen. Parts-maker THK Co. retreated 5.1 percent to 1,972 yen.

Stocks also fell after the yen appreciated to as high as 76.30 against the dollar yesterday, the strongest level since March. Against the euro, Japan’s currency strengthened to 108.72 from 111.72 at the close of stock trading in Tokyo yesterday. A stronger yen hurts Japanese exporters because it cuts the value of overseas sales.

The yen pared its gains against the dollar to 77.82 today after the Nikkei newspaper reported the Japanese government is preparing steps to reverse the currency’s recent appreciation and the Bank of Japan may consider a 5 trillion ($65 billion) to 10 trillion yen expansion of a 40 trillion yen asset-buying fund at an Aug. 4- 5 meeting.

‘Less Attractive’

“Investing in Japanese shares isn’t that attractive because the U.S. economic outlook is dimming and the yen is appreciating,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion. “Investors are also concerned fiscal tightening by the U.S. government will be a problem while the economy is weakening.”

Tokyo Electron tumbled 6.2 percent to 3,940 yen, the lowest close since Sept. 1. The company cut its full-year profit forecast by 49 percent to 34 billion yen because of falling chip gear prices and slowing capital spending among semiconductor makers. The company slashed its planned second-half dividend to 22 yen from 85 yen.

Other chip-related companies also declined. Dainippon Screen Manufacturing Co., a maker of equipment used to lay down circuit patterns on semiconductor wafers, plunged 6.2 percent 579 yen. Nomura Holdings Inc.’s analyst Tetsuya Wadaki yesterday cut his rating on the company to “neutral” from “buy,” saying orders are likely to drop in the July-September period.

Advantest, Sumco

Advantest Corp. (6857), the world’s biggest maker of memory-chip testers, declined 2.2 percent to 1,346 yen. Sumco Corp., a maker of silicon wafers, fell 1.6 percent to 1,227 yen.

Among stocks that rose, Sumitomo Corp., Japan’s fourth- largest trading company by market value, advanced 3 percent to 1,123 yen, the most on the Nikkei. Profit increased by 36 percent to 83.6 billion yen ($1.08 billion), a record for the fiscal first quarter, Chief Financial Officer Toyosaku Hamada told reporters in Tokyo today. The result beat the 60.3 billion yen avrage of four analyst estimates compiled by Bloomberg.

Nippon Soda Co., a chemicals maker, advanced 2.4 percent to 382 yen. The company boosted its profit forecast by 33 percent to 3.2 billion yen for the six months ending Sept. 30, citing an increase in overseas sales of agricultural chemicals.

To contact the reporters on this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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

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