Japan Stocks Fall on Bernanke Remarks, Future Settlement

Japan’s Nikkei 225 Stock Average (TPX) fell the most in three weeks after Federal Reserve Chairman Ben S. Bernanke declined to specify options for further easing. Shares extended their drop after the settlement for Nikkei futures on speculation the market will keep falling, and as the yen rose.

Mazda Motor Corp. (7261), an automaker that gets 28 percent of its sales in North America, dropped 2.9 percent. Sony Corp. (6758), a consumer electronics company that relies on Europe for a fifth of its sales, lost 5.3 percent after Spain’s credit grade was cut by Fitch Ratings. Renesas Electronics Corp. soared 19 percent on a report that the maker of microcontrollers for cars canceled a share sale.

The Nikkei 225 lost 2.1 percent to 8,459.26 at the 3 p.m. close of trading in Tokyo, the biggest drop since May 18. It extended losses after the futures settlement, known as the “special quotation.” The Topix Index fell 1.8 percent to 717.74, gaining 1.2 percent on the week. Shares fell even after China announced its first interest-rate cut since 2008.

“That Bernanke didn’t say anything concrete seems to be weighing on the market in the short term,” said Ichiro Yamada, general manager of equities who helps manages about $3.77 billion in stocks at Fukoku Mutual Life Insurance. “We had a special quotation, and today’s drop is also largely due to technical reasons.”

Trading volume on the Nikkei 225 (NKY) was 42 percent above the 30-day average as the price for the equity gauge’s futures and options contracts for June delivery was settled at 8,613.40, according to traders.

Topix Valuations

The Topix capped its first weekly advance in 10 weeks after the measure on June 4 closed at its lowest since 1983. The index fell 18 percent from this year’s high on March 27 amid concern the European crisis is deepening and as growth in China slows. Equities on the measure are valued at 0.85 times book value, about the same level as in October 2008 amid the global financial crisis.

Shares fell today even as data showed that Japan’s economy grew more than initially estimated. Separately, the nation posted a smaller-than-expected current-account surplus.

Futures on the Standard & Poor’s 500 Index fell 0.6 percent today. The gauge closed little changed yesterday, paring earlier gains as the Fed’s Bernanke said the central bank will assess the U.S. economy before deciding if more stimulus is needed and after a report that Greece’s upcoming election could be derailed, intensifying concern the nation may exit the euro.

Exporters to the U.S. fell, with Mazda sliding 2.9 percent to 99 yen. Dainippon Sumitomo Pharma Co., a drug maker that gets 31 percent of its sales in the U.S., fell 2.6 percent to 750 yen.

The People’s Bank of China said on its website yesterday that its benchmark one-year lending rate will drop to 6.31 percent from 6.56 percent effective today. The one-year deposit rate will fall to 3.25 percent from 3.5 percent.

Spain Downgrade

Stocks linked to Europe fell as Spanish Prime Minister Mariano Rajoy said he’s talking to European leaders about how to shore up the country’s banks after Spain’s credit grade was cut to within two levels of junk by Fitch Ratings. Spain is trying to overcome German opposition to a plan to allow the euro region’s bailout funds recapitalize lenders directly.

“The key issue really is around European sovereign debt,” said Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd., which manages about $1 billion. “Even though China’s rate cut was unexpected, people are selling because it confirms in their minds that the growth outlook is problematic.”

Sony lost 5.3 percent to 1,015 yen. Nippon Sheet Glass Co. (5202), the company on the Nikkei 225 that relies the most on Europe, slumped 3.6 percent to 81 yen.

Shares of exporters extended losses as the yen gained against all 16 of its major counterparts. A stronger yen cuts the value of Japanese companies’ earnings abroad when repatriated back home.

Renesas Soars

Renesas Electronics rose 19 percent to 316 yen after the Mainichi newspaper said the company shelved plans to sell 100 billion yen ($1.26 billion) in shares.

The Nikkei 225 Volatility Index (VNKY) added 12 percent to 28.56, indicating traders expect a swing of about 8 percent on the benchmark gauge over the next 30 days.

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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