Japanese Stocks Slump Most Since Quake Rout on Signs U.S. Economy Slowing

Japanese stocks fell by the most since the aftermath of the March earthquake and tsunami as an unexpected drop in U.S. consumer spending amplified concern that the world’s biggest economy is faltering, dimming prospects for exporters and banks.

Honda Motor Co., which gets more than 40 percent of sales in North America, lost 3.2 percent. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s largest bank by market value, slipped 2 percent after Daiwa Securities Capital Markets Co. cut its rating on its shares. Ibiden Co., an electronics and ceramics maker, plunged 6.9 percent after cutting its profit forecast.

The Nikkei 225 Stock Average fell 2.1 percent to 9,637.14 at the 3 p.m. close in Tokyo. The broader Topix index declined 2 percent to 826.75 with all its 33 industry groups retreating. Both gauges had the biggest drop since March 15, after the March 11 magnitude-9 temblor, tsunami and nuclear disaster triggered the biggest two-day rout of Japanese stocks since October 1987.

“With the weak economic data in the U.S., people have started to worry whether the economy will really be able to pick up,” said Kenji Sekiguchi, general manager at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $75 billion. “The outlook for earnings at exporters is becoming more uncertain. We cannot help thinking it will take a while for Japanese stocks to rebound.”

Futures on the Standard & Poor’s 500 Index gained 0.2 percent today. In New York yesterday, the index retreated 2.6 percent, the most in almost a year, to a seven-month low of 1,254.05 after the consumer spending report.

Exporters Drop

U.S. stocks fell for a seventh consecutive day yesterday, the longest losing streak since an eight-day period ended in October 2008, erasing the 2011 gain for the S&P 500. The Stoxx Europe 600 Index lost 1.9 percent to 256.98 in London, the lowest level since Aug. 31, entering a so-called correction with the index dropping 10 percent from the year’s high point.

Exporters in Japan retreated on concern earnings will be hurt as the U.S. economy slows. Honda closed at 3,010 yen. Kyocera Corp. (6971), a maker of solar panels that gets 17 percent of its sales in the U.S., declined 2.3 percent to 8,040 yen. Canon Inc. (7751), the world’s biggest camera maker, dropped 1.7 percent to 3,690 yen.

Commerce Department figures showed consumer purchases slid 0.2 percent in June after a 0.1 percent gain in May. It was the first drop in spending in almost two years. The median estimate of 77 economists surveyed by Bloomberg News was for a 0.1 percent increase. Incomes grew at the slowest pace since November and the savings rate climbed.

Confidence Slumps

A slump in confidence threatens to derail the U.S. economy. The Thomson Reuters/University of Michigan final index of consumer sentiment fell in July to the weakest level since March 2009. The Bloomberg Consumer Comfort Index also dropped in the week ended July 24 to the lowest level since May.

The Senate voted yesterday to ratify a U.S. debt-limit compromise that will avert a default even as it defers decisions on the nation’s finances to a bipartisan panel and may only modestly reduce deficits. The House on Aug. 1 approved the measure, which raises the national debt ceiling enough to fund the government until 2013 and threatens automatic spending cuts to enforce a goal of cutting $2.4 trillion over the next decade.

Moody’s Investors Service said the U.S. credit rating may be downgraded for the first time on concern that fiscal discipline may ease, further debt-reduction measures won’t be adopted and the economy may weaken. The U.S., rated Aaa since 1917, was placed on negative outlook, New York-based Moody’s said in a statement.

Yen Talks

The yen appreciated to 76.96 against the dollar, compared with 77.42 at the close of stock trading in Tokyo yesterday. Against the euro, Japan’s currency strengthened to 109.21 from 110.32. A stronger yen hurts Japanese exporters because it cuts the value of overseas sales.

Prime Minister Naoto Kan said today he’s concerned about recent movements in the foreign-exchange market. Bank of Japan Governor Masaaki Shirakawa said the central bank will closely monitor the effect of the yen’s appreciation over the economy.

Carmakers also declined after Toyota Motor Corp. (7203) and Honda posted declines in U.S. sales in July. Toyota sales fell 23 percent to 130,802, while Honda deliveries plunged 28 percent to 80,502. Toyota shares dropped 1.3 percent to 3,120 yen.

Banks retreated after Daiwa Securities cut its rating on lenders including Mitsubishi UFJ, Sumitomo Mitsui Financial Group Inc. (8316) and Mizuho Financial Group Inc. (8411) to “neutral” from “outperform” after their shares rose to levels close to their target prices.

Banks Retreat

Mitsubishi UFJ closed at 392 yen. Sumitomo Mitsui, Japan’s second-largest bank by market value, dropped 2.1 percent to 2,428 yen. Mizuho, the No. 3, retreated 1.6 percent to 127 yen.

Ibiden ended the day at 2,139 yen, falling the most since March 15. The company cut its full-year net income forecast 48 percent to 12.3 billion yen ($159 million), citing a slowdown of the U.S. and European economies and concern anti-inflation measures in emerging markets will damp growth.

Nitto Boseki Co., a maker of textiles, building materials and glass fiber, plunged 10 percent to 202 yen, the most on the Nikkei. The company projected net income will decline 15 percent to 2.4 billion yen in the year ending in March 2012, citing additional charges due to possible aftershocks. It had earlier forecast profit would rise to 3 billion yen.

To contact the reporters 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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