Japan Stocks Drop Before Europe Crisis Summit; NGK Plunges on Fire Report

Japanese stocks fell as investors awaited the results of a European summit tomorrow where leaders are expected to decide on details of the region’s bailout fund. Steelmakers slid amid concern prices of the material will drop.

Mazda Motor Corp. (7261), a carmaker that gets about 18 percent of sales in Europe, lost 3.1 percent. Tokyo Steel Manufacturing Co. and other producers of the metal dropped after Bank of America Merrill Lynch cut ratings in the sector. NGK Insulators Ltd. (5333) plunged 17 percent on a report the maker of autoparts asked customers not to use some of its batteries after a fire. Fanuc Corp. (6954), a maker of industrial robots, slumped 3 percent for the biggest decline in three weeks after reporting lower-than- estimated earnings.

“There are a lot of reasons for investors to stay on the sidelines right now, including the upcoming European summit and earnings,” said Naoki Fujiwara, who helps oversee $6 billion at Shinkin Asset Management Co. in Tokyo. “People will be turning their focus on individual stocks than the overall market.”

The Nikkei 225 (NKY) dropped 0.9 percent to 8,762.31 at the 3 p.m. close in Tokyo, after earlier rising as much as 0.3 percent. The broader Topix index fell 1 percent to 747.70 before European leaders meet tomorrow to draft plans for insulating the region’s banks from the debt crisis.

“Clearly, the dominant factor is what’s happening in Europe,” said Angus Gluskie, who manages more than $350 million at White Funds Management in Sydney. “At this stage, I think there is some superficial optimism that some sort of deal might be reached. Underneath the surface, though, I think investors still have a lot of questions in the back of their minds and they are alert to risks. Most investors want to get their minds around details tomorrow.”

Exporters Slide

Mazda declined 3.1 percent to 157 yen. Canon Inc. (7751), a camera maker that gets about 30 percent of sales from Europe, slid 1.8 percent to 3,490 yen. Nippon Sheet Glass Co., which counts the market as its biggest, lost 1.2 percent to 170 yen.

Steelmakers declined after Bank of America Merrill Lynch said exports of the material are likely to fall. The brokerage cut its rating on Nippon Steel Corp. (5401), Japan’s largest steelmaker by market value, to “neutral” from “underperform.” The shares dropped 2.8 percent to 209 yen. Tokyo Steel Manufacturing sank 3.2 percent to 646 yen.

The Topix has tumbled 17 percent this year as Japan rebuilds from the March tsunami and amid concern Europe’s debt crisis will spread to the banking system. The decline has cut the price of shares on the index to 0.89 times estimated book value, near the lowest since March 2009.

Fanuc Earnings

NGK Insulators plunged 17 percent to 926 yen today. The Nikkei newspaper said the maker of electrical insulators asked customers not to use its sodium-sulfur batteries after a Sept. 21 fire at a Mitsubishi Materials Corp. plant. The company said that, while it wasn’t the source of the report, it’s investigating the fire.

Fanuc fell 3 percent to 12,160 yen. The company reported half-year earnings of 379.18 yen per share, less than its prior forecast of 383.15 yen per share. Fanuc forecast net income will rise to 150 billion yen for the year ending March 31, up 25 percent from a year earlier, according to an exchange filing.

Olympus Corp. (7733) surged 8.2 percent to 1,189 yen in Tokyo, rebounding from a seven-day rout after brokers were told by Japan Securities Finance Co., a provider of stock-lending services, that limits may be imposed on the number of shares available for trading through margin accounts. That may make short sales harder, according to Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co.

Heavy Machinery

The maker of cameras and endoscopes is under fire from shareholders for $687 million in payments to advisers on a 2008 acquisition. Shares of Olympus have fallen 52 percent, erasing more than $4.5 billion in market value, since ousted president Michael Woodford revealed the payouts on Oct. 14.

Makers of heavy machinery rallied after Caterpillar Inc., the world’s largest construction- and mining-equipment maker, posted earnings that exceeded analysts’ estimates. Komatsu Ltd. (6301), Japan’s biggest equipment maker by sales, climbed 3.1 percent to 1,833 yen, while Hitachi Construction Machinery Co. gained 2.7 percent 1,432 yen.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net.

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

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