Japanese stocks fell, paring a weekly advance, after Standard & Poor’s cut Spain’s credit rating, fueling concern that a deterioration of Europe’s debt crisis will weigh on Asian economies and corporate earnings.
Nissan Motor Co., a carmaker that gets about 15 percent of its revenue from Europe, dropped 1.7 percent. Canon Inc. (7751) slipped 2.6 percent after the camera maker said it’s preparing to move production from two factories affected by flooding in Thailand. Olympus Corp. (7733) plunged 18 percent after the optical equipment maker’s board ousted Michael Woodford as president.
“The market has taken positively the idea of recapitalizing Europe’s banks and stocks have rebounded for the past week,” said Kazuyuki Terao, chief investment officer of RCM Japan Co. “Taking concrete action isn’t going to be easy because Germany and France are divided on the issue. Until markets get that, share prices are not going to rise.”
The Nikkei 225 (NKY) Stock Average fell 0.9 percent to 8,747.96 at the 3 p.m. close in Tokyo, trimming its weekly advance to 1.7 percent. The broader Topix dropped 1.3 percent to 748.81, with nearly seven stocks falling for each that advanced.
The Topix tumbled 17 percent this year amid concern the U.S. would fall into another recession while Europe’s debt crisis threatens to spread to the banking system. The slide has cut the price of shares on the index to 0.88 times estimated book value, near the lowest since March 2009.
Futures on the Standard & Poor’s 500 Index added 0.2 percent today, reversing losses of as much as 0.4 percent. The U.S. gauge slipped 0.3 percent in New York yesterday, paring gains from the best rally over seven days since 2009, after JPMorgan’s earnings dropped and amid speculation that equities rose too much on optimism Europe’s debt crisis may be contained.
Stocks in Europe fell yesterday after the European Central Bank said imposing further losses on holders of Greek debt posed a risk to the euro area’s financial stability. The slump came even as Slovakia approved Europe’s enhanced bailout fund, completing ratification across the 17-country bloc.
An escalation in Europe’s debt crisis may trigger a selloff in Asian assets and disrupt currency markets, the International Monetary Fund said yesterday. Spain had its credit rating cut one level by Standard & Poor’s as rising defaults threaten efforts to stem Europe’s sovereign-debt crisis and limit risks for the region’s banks.
“Investors are hoping Europe will find a solution to the sovereign-debt crisis, but if that doesn’t happen the market could come back down again,” said Lee King Fuei, a Singapore- based fund manager at Schroders Plc, which oversaw $323 billion as of June 30. “Politically, it’s going to be difficult to find a solution. Governments in the U.S. and Europe are left with limited stimulus options.”
Nissan dropped 1.7 percent to 713 yen. Gaming-console maker Nintendo Co., which depends on Europe for about 40 percent of its sales, declined 2 percent to 11,770 yen. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender, fell 1.5 percent to 335 yen.
Companies with operations in Thailand saw shares drop as floods that have killed almost 300 people in the country crippled manufacturing hubs outside of Bangkok.
Canon dropped 2.6 percent to 3,445 yen. The company may shift inkjet printer production to another plant in Thailand or Vietnam as two of its factories were shut by flooding, said Richard Berger, a company spokesman.
Honda Motor Co., Japan’s second-largest carmaker by market value, dropped 2.4 percent to 2,248 yen. The company reduced car output at its Malaysia plant after its parts supply in Thailand was disrupted, the Edge reported online.
Olympus tumbled 18 percent to 2,045 yen, the steepest drop on the Nikkei and the stock’s most since 1974. The camera and endoscope maker said its board voted to replace Woodford as president with Chairman Tsuyoshi Kikukawa due to disagreements over management style.
“There was a high expectation among overseas investors when Woodford was appointed that he would reform the company,” Yukihiro Goto, a Tokyo-based analyst at Macquarie Group Ltd., said by phone today. “He had announced clear financial targets such as cost reductions, and it’s uncertain whether those targets will still be pursued.”
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