Japan Stocks Fall as Ratings Firms Say EU Summit Produced Little

Dec. 13 (Bloomberg) -- Japanese stocks fell, with the Nikkei 225 (NKY) Stock Average paring yesterday’s gains, after ratings companies said last week’s European summit did little to resolve the debt crisis that has roiled markets this year.

Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, fell 2.6 percent. Hitachi Construction Machinery Co (6305), a Japanese machinery maker that counts China as the biggest market, slid 2.6 percent after Chinese housing sales dropped. Chip-related companies including Tokyo Electron Ltd. (8035) slid after bellwether Intel Corp. cut its sales forecast. Olympus Corp. rose for a third day on speculation the scandal-hit company won’t be delisted.

The Nikkei 225 declined 1.2 percent to 8,552.81 as of the 3 p.m. close in Tokyo. The broader Topix index lost 0.8 percent to 740.71. The broader gauge has all but wiped out yesterday’s gains as investors assess the impact of Europe’s fifth major agreement in 19 months aimed at ending the crisis.

“Nothing new came of last week’s European summit,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “If EU nations get downgraded, funding costs in the region will definitely rise.”

The Standard & Poor’s 500 Index (SPXL1) slid 1.5 percent yesterday in New York after Moody’s Investors Service said the latest European summit didn’t produce “decisive” measures to end the crisis. Fitch Ratings said the summit did little to ease pressure on Europe’s sovereign bond ratings. Futures on the S&P 500 index were little changed today.

‘Negative News Flows’

“The market is pricing in possible downgrades to a degree, but people have a sense that this will not lead to a financial crisis,” saidKazuyuki Terao, chief Investment Officer of RCM Japan Co.

Exporters of cars and electronics contributed the most to the Topix’s decline. Sony fell 2.6 percent to 1,386 yen. Honda Motor Co., Japan’s second-biggest automaker by market value, dropped 2.9 percent 2,384 yen.

In China, housing transactions declined in 27 out of 35 cities tracked by Soufun Holdings Ltd. during the week of Dec. 5-11, with 13 cities seeing a drop of more than 50 percent. Transactions fell more than 60 percent in at least 4 cities, including Tianjin and Hangzhou, according to the operator of the nation’s biggest real-estate website.

Hitachi Construction fell 2.6 percent to 1,370 yen. Komatsu Ltd. (6301), Japan’s largest construction machinery maker that gets 23 percent of its sales in China, lost 1.9 percent to 1,962 yen.

Topix Performance

Japanese companies this year have had share prices hit by more than Europe’s crisis. The yen’s rise to a postwar high against the dollar and disruptions to production from floods in Thailand and the country’s worst earthquake on record have sent the Topix down about 18 percent since January, compared with a 14 percent decline on the Stoxx Europe 600 Index.

Toyota Motor Corp. (7203), Japan’s largest company by sales, last week cut its full-year profit forecast by more than half, citing damage to factories in Thailand. Toyota’s shares have dropped 20 percent in 2011 and production cuts have jeopardized the company’s position as the world’s top carmaker.

“Investors appreciate a quick rebound in supply chains despite a lot of hardships,” said Kenji Sekiguchi, general manager at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $75 billion. “The market’s focus will be on domestic demand and global economic slowdowns. People are focusing on reconstruction efforts.”

The March disaster in some parts has decided winners and losers this year. Tokyo Electric Power Co. (9501), the utility at the center of the worst nuclear disaster since Chernobyl, has been the worst performer in the Topix index, losing 88 percent. Nissei Build Kogyo Co., a homebuilder benefiting from reconstruction efforts, has jumped to 211 yen from 52 yen at the end of 2010, becoming the biggest winner on the gauge.

Chip Shares Fall

Japanese manufacturers of semiconductors and chipmaking equipment dropped today after Intel, the world’s largest chipmaker, slashed its sales forecast. The Santa Clara, California-based company said flooding in Thailand had caused a shortage of hard-disk drives that is forcing computer companies to cut production.

Tokyo Electron, Japan’s biggest manufacturer of chipmaking gear, fell 1.3 percent to 4,115 yen. Advantest Corp. (6857), a maker of memory-chip testers, slid 2.6 percent to 800 yen. Renesas Electronics Corp. (6723), the world’s largest producer of microcontrollers used in cars, dropped 3 percent to 523 yen.

Olympus rose for a third day amid speculation it will meet a deadline for reporting earnings tomorrow. The company said yesterday it plans to release its second-quarter earnings by Dec. 14. Tokyo Stock Exchange rules require the company to be delisted if it misses the deadline.

Shares of the optical equipment maker advanced 5.4 percent to 1,370 yen.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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