Japanese Stock Drop as Europe Debt Crisis Concern Flares

Japanese stock futures declined as rising bond yields in Europe fueled concern the debt crisis has yet to be contained, overshadowing signs of improvement in the U.S. jobs market.

American depositary receipts of Sony Corp. (6758) sank 1.2 percent from the closing share price in Tokyo as the euro weakened against the yen, crimping the earnings outlook for Japan’s exporters. Shares of Kobe Steel Ltd. (5406) may be active after the steelmaker posting a wider-than-expected loss. Inpex Corp. (1605) and other energy companies may advance after crude prices yesterday gained for the first time in three days.

“In Europe, investors are starting to be conscious of the unsustainability of Spain’s debt and that’s weakening the euro against the yen,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc.

Futures on Japan’s Nikkei 225 Stock Average (NKY) expiring in June closed at 9,715 in Chicago yesterday, compared with 9,790 in Osaka, Japan. They were bid in the pre-market at 9,720 in Osaka, at 8:05 a.m. local time. Markets in Australia, New Zealand and Hong Kong are closed today for a holiday.

Futures on the Standard & Poor’s 500 Index (SPXL1) added 0.1 percent today. The index slipped 0.1 percent in New York yesterday as Spanish bonds fell for a third day, pushing the spread between yields on 10-year Spanish and German debt to more than 400 basis points for the first time since Dec. 12.

Euro Slides

The euro dropped to a four-week low versus the yen as Spanish and Italian bonds slumped and borrowing costs increased at a French auction, adding to concern the region’s debt crisis is spreading.

The 17-nation currency weakened to as low as 106.89 yen last night in Tokyo, compared with 108.13 yen at the close of stock trading yesterday, cutting the value of some overseas income at Japanese companies.

The S&P 500 trimmed losses yesterday after Labor Department data showed 357,000 Americans filed unemployment claims in the week ended March 31, the fewest since April 2008.

A report Friday in Washington may show the U.S. economy added more than 200,000 jobs in March for a fourth consecutive month, the longest streak of similar increases since 2000.

Crude oil for May delivery gained 1.8 percent to $103.31 a barrel in New York yesterday, its first advance in three days. The London Metal Exchange Index of prices for six industrial commodities including copper and aluminum added 0.8 percent.

The Bloomberg China-US 55 Index (CH55BN) of the most-traded Chinese equities in the U.S rose 1.2 percent to 103.08 in New York yesterday on speculation reports due next week from the mainland will show that the world’s second-largest economy has bottomed.

The MSCI Asia Pacific Index (MXAP) gained 10 percent this year through yesterday, compared with an 11.2 percent advance by the S&P 500 and a 5.9 percent increase by the Stoxx Europe 600 Index.

Stocks in the Asian benchmark are valued at 1.4 times book value, compared with 2.3 times for the S&P 500 and 1.4 times for the Stoxx 600, according to data compiled by Bloomberg. A number below 1 means companies can be bought for less than value of their assets.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net

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

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