Japan Stocks Plunge Most Since March as Global Sell-Off Rattles Investors

Photographer: Kiyoshi Ota/Bloomberg

Pedestrians walk past an electronic stock board outside a securities firm in Tokyo on Aug. 2, 2011. Close

Pedestrians walk past an electronic stock board outside a securities firm in Tokyo on Aug. 2, 2011.

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Photographer: Kiyoshi Ota/Bloomberg

Pedestrians walk past an electronic stock board outside a securities firm in Tokyo on Aug. 2, 2011.

Japanese stocks plunged by the most in more than four months, as concern the global economy is stalling triggered an equities rout that drove the Standard & Poor’s 500 Index to its worst slump since 2009.

Sony Corp. (6758), which makes half of its sales in the U.S. and Europe, tumbled 5 percent. Nomura Holdings Inc. (8604), Japan’s largest brokerage, plunged 5.4 percent to the lowest level since February 1975. Inpex Corp. (1605), Japan’s biggest energy exploration company, plummeted 6.8 percent after crude prices dropped.

“There’s enough fear out there that I think foreign investors might start to dump Japanese stocks,” said Takashi Aoki, who helps oversee about $2.2 billion at Mizuho Asset Management Co. in Tokyo. “Once foreign investors start to sell in earnest, the sell-off usually continues for a while.”

The Nikkei 225 Stock Average fell 3.7 percent to 9,299.88 at the 3 p.m. close in Tokyo, sliding the most since March 15. All but nine stocks declined on the 225-member gauge. The broader Topix index plunged 3.1 percent to 800.96. For the week, the Nikkei lost 5.4 percent while the Topix index dropped 4.8 percent, the biggest weekly declines since the five-day period following Japan’s March 11 earthquake.

U.S. options prices, which Mizuho Asset’s Aoki cited as a gauge of market anxiety, soared the most in four years as investors scrambled to buy protection against greater stock- market losses. Following Japan’s quake, net buying by foreign investors in 14 out 20 weeks through last week helped to limit losses in Japanese equities.

Global Rout

In New York yesterday, the S&P 500 tumbled 4.8 percent to an eight-month low of 1,200.07, erasing its 2011 gain. The Stoxx Europe 600 Index sank 3.5 percent to 243.16 in London, the biggest decline since May 2010.

“It’s a panic attack,” said Prasad Patkar, who helps manage the equivalent of $1.7 billion at Sydney-based Platypus Asset Management Ltd. “There was an expectation that resolution of the U.S. debt-ceiling issue would trigger a relief rally. It looks like everyone forgot about the weakness in the underlying economy.”

Sony retreated 5 percent to 1,828 yen. Toyota Motor Corp. (7203) sank 3.2 percent to 3,040 yen. Canon Inc. (7751), the world’s biggest camera maker, dropped 3.9 percent to 3,580 yen.

European Central Bank President Jean-Claude Trichet said policy makers will offer banks in the region additional cash to ease tensions in financial markets.

‘No Measures’

Trichet indicated the ECB is reluctant to shelve further rate hikes even as investors reduce bets on the central bank adding to its two rate moves in 2011. While acknowledging a “particularly high” level of uncertainty, rates are still “accommodative” and inflation risks “remain on the upside,” he said.

“Investors are increasingly removing risk assets,” said Hideyuki Ishiguro, assistant manager at the investment strategy department at Okasan Securities Co. in Tokyo. “Even though the economy is slowing and the Europe crisis persists, policy makers in the U.S. have not taken measures.”

Brokerages fell on concern profits may drop while equities decline globally. Nomura plunged 5.4 percent to 349 yen, the lowest close in 36 years. Daiwa Securities Group Inc. (8601), Japan’s second biggest brokerage, lost 3.6 percent to 321 yen.

The rout in equities followed yesterday’s yen sales by the Japanese government to stem currency gains that threaten the nation’s economic recovery. The yen appreciated to as high as 78.43 against the dollar today, compared with 79.41 at the close of stock trading in Tokyo yesterday. Against the euro, Japan’s currency strengthened to 110.71 from 113.30. A stronger yen cuts the value of overseas sales for Japan’s exporters.

U.S. Jobs

The U.S. Labor Department said yesterday that initial claims for unemployment insurance payments fell last week to a level that shows limited improvement in the labor market of the world’s biggest economy. Applications for jobless benefits dropped 1,000 in the week ended July 30 to 400,000, the fewest in almost four months.

Employers probably added 85,000 jobs in July, economists project a Labor Department report will show today. That increase may not be enough to reduce an unemployment rate that’s holding above 9 percent, they forecast.

Inpex plummeted 6.8 percent to 533,000 yen, the most since July 2010. Mitsubishi Corp. (8058), Japan’s No. 1 trading company, slumped 2.9 percent to 1,932 yen. Mitsui & Co., Japan’s second- largest trading company, declined 3 percent to 1,349 yen.

Crude oil for September delivery fell 5.8 percent to $86.63 a barrel in New York yesterday, the lowest settlement since Feb. 18, amid intensifying concern the global economy is slowing. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum slid 1.9 percent.

Toyobo Co., a textile maker, was among eight stocks advancing on the Nikkei 225. The stock gained 1.7 percent to 117 yen, after the company raised its full-year profit forecast 29 percent. Toyobo said sales declines due to March’s earthquake were limited to products for cars and that a recovery in the auto industry is likely in the second quarter, according to a statement to the Tokyo Stock Exchange.

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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