Japan Stocks Drop as Sarkozy, Merkel Reject Bigger Bailout Plan

Japanese stocks fell for the first time in three days as European leaders said they won’t expand a fund to end the region’s debt crisis and U.S. housing starts dropped, reviving concern exporters’ earnings will be curbed.

Toyota Motor Corp. (7203), the world’s largest carmaker, lost 1.5 percent after French President Nicolas Sarkozy and German Chancellor Angela Merkel rejected a plan to expand the rescue fund at a meeting in Paris. Inpex Corp. (1605), Japan’s biggest energy exploration company, declined 3 percent as crude oil fell yesterday. Sumco Corp. (3436), a maker of silicon wafers, tumbled 5.1 percent after Dell Inc. (DELL) cut its revenue forecast following sluggish consumer demand.

The Nikkei 225 Stock Average gave up 0.6 percent to 9,057.26 at the 3 p.m. close in Tokyo. The broader Topix index dropped 0.3 percent to 776.65.

Europe has been facing financial problems and now we are seeing the economy is slowing,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion.

Futures on the Standard & Poor’s 500 Index slid 0.2 percent today. In New York, the index fell 1 percent to 1,192.76 yesterday as the German and French leaders rejected selling euro bonds and expanding the 440 billion-euro ($633 billion) rescue fund. The leaders also proposed resubmitting a financial- transaction tax that was rejected in 2010.

The Paris meeting “confirmed debt issues cannot be resolved in a short period of time,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc.

European Growth

Exporters declined after reports showed economic growth in Europe and the U.S. is slowing, hurting the outlook for overseas earnings. Toyota lost 44 yen to 2,855 yen. Sony Corp. (6758), Japan’s biggest exporter of consumer electronics, slid 0.8 percent to 1,687 yen. Honda Motor Co., Japan’s third-largest carmaker, sank 2.5 percent to 2,552 yen.

Gross domestic product in the 17-nation euro area expanded 0.2 percent in the second quarter from the previous three months, when the economy grew 0.8 percent, the European Union’s statistics office in Luxembourg said in a statement yesterday. That’s the weakest growth since the euro region emerged from a recession in late 2009 and was less that the 0.3 percent median estimate of 34 economists in a Bloomberg News survey.

Housing Starts

In the U.S., housing starts fell 1.5 percent in July from June, the Commerce Department reported yesterday. Building permits, a proxy for future construction, also dropped.

“The U.S. housing numbers were not strong, and that signals a slowdown in the U.S. economy may persist,” SMBC Nikko Securities’ Nishi said.

Resource companies had the biggest drop among the 33 industry groups in the Topix as oil prices fell yesterday. Inpex lost 16,000 yen to 510,000 yen. Japan Petroleum Exploration Co. (1662), the second-biggest oil driller, slid 1.5 percent to 3,305 yen.

Crude oil for September delivery declined 1.4 percent to settle at $86.65 a barrel in New York yesterday. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum dropped 0.5 percent.

Semiconductor-related stocks fell after Dell, the second- largest personal computer maker in the U.S., missed analysts’ sales estimates and cut its revenue forecast, hurt by sluggish spending on desktop computers and consumer technology.

Dell Sales

Second-quarter sales rose less than 1 percent to $15.7 billion, Texas-based Dell said yesterday in a statement. Analysts had estimated revenue of $15.8 billion in the period, which ended July 29, according to Bloomberg data. The company now expects sales growth of between 1 percent and 5 percent this year, down from a previous range of 5 percent to 9 percent.

Sumco plunged 54 yen to 996 yen, the lowest close since December 2008. Elpida Memory Inc. (6665), which makes memory chips, retreated 3.9 percent to 517 yen. Renesas Electronics Corp. (6723), a semiconductor maker, declined 2.7 percent to 534 yen, a level not seen since November 2009.

Sumco declined also after UBS AG cut its stock price estimate to 1,100 yen from 1,600 yen because of weakening earnings on lower sales volume of semiconductor wafers and falling prices of solar cell wafers, according to a report dated yesterday.

Among stocks that rose, general contractors advanced as JPMorgan Chase & Co. raised its rating on the sector’s shares, saying major contractors will receive orders to clear rubble from the March earthquake.

Kajima Corp. (1812), Japan’s biggest general contractor by revenue, increased 3 percent to 238 yen. Taisei Corp. (1801), the third-largest, climbed 4.3 percent to 195 yen. Obayashi Corp. (1802), the No. 4, gained 3.7 percent to 367 yen.

Shipping lines advanced the most in the Topix as The Baltic Dry Index, a measure of shipping costs for commodities, rose for a fifth day yesterday, increasing 2.9 percent.

To contact the reporter 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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