Japan’s Topix Index posted its biggest two-day decline of the year as a Chinese central bank board member warned of slowing growth, and the yen rose to a 11- year high against the euro amid concern Greece may exit the currency bloc, hurting the outlook for exporters.
Komatsu Ltd. (6301), a maker of construction machinery that gets 14 percent of its sales in China, fell 3.3 percent. Ricoh Co. (7752), a producer of office equipment that counts on Europe for 21 percent of revenue, retreated 7 percent. Nippon Steel Corp. (5401) paced declines in the sector on a report the company will probably report an 80 percent fall in first-quarter profit.
The Topix fell 1.8 percent to 720.62 at the 3 p.m. trading close in Tokyo, capping the biggest two-day drop since September. The benchmark Nikkei 255 Stock Average (NKY) slid 1.9 percent to 8,508.32, with trading volume 9.5 percent below the 30-day average. Shares fell on increased signs of a weakening global expansion that may weigh on a Japanese economy dependent on reconstruction from last year’s earthquake, the Cabinet said in a monthly report today.
“There’s a lot of bad news to start the week with,” David Gaud, a senior portfolio manager at Edmond de Rothschild Asset Management in Hong Kong, said on Bloomberg Television. “The markets are facing a lot of negative news, a lot of uncertainty from Europe. Second quarter GDP in China was probably a little below what official numbers are stating.”
Stocks fell on expectations China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months through September, according to Song Guoqing, an academic member of the People’s Bank of China monetary policy committee.
Komatsu fell 3.3 percent to 1,655 yen. Taiyo Yuden Co., a maker of electronic parts that gets 30 percent of sales in China, slid 5.3 percent to 640 yen.
Companies linked to Europe declined after the common currency touched 94.91 yen, the lowest since 2000. German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece, whose creditors will assess this week how far off course the country is from bailout targets.
Ricoh fell 7 percent to 529 yen. Sony Corp., a consumer- electronics company that gets about 20 percent of its sales in Europe, fell 4.1 percent to 919 yen. Canon Inc., the world’s biggest maker of cameras, fell 4.6 percent to 2,742 yen on expectations shares may fall 20 percent in the next 12 months without changes to operations and leadership, Barron’s reported.
The Topix has fallen 17 percent from this year’s peak in March as growth slowed in the U.S. and China, and concern mounted about Europe’s debt crisis.
Shares on the equity gauge are valued at 0.9 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.4 for the Europe Stoxx 600 Index. A number below one means investors can buy companies for less than the value of their assets.
Futures on the S&P 500 fell 0.5 percent today. The gauge dropped 1 percent in New York on July 20, the biggest loss since June 25, as commodities sank on news China will not relax property control policies.
Steelmakers declined on concern slowing global growth will cut earnings. Nippon Steel lost 2 percent to 151 yen on a Nikkei newspaper report that its fiscal first-quarter profit will drop 80 percent from a year earlier. JFE Holdings Inc. declined 3.1 percent to 1,025 yen after the Nikkei reported profit dropped about 60 percent over the same period.
Financial stocks slid after the credit grades of Japan’s three biggest lenders were cut by Fitch Ratings, which cited the government’s weakened ability to support the banking system. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, fell 2.5 percent to 359 yen, Mizuho Financial Group, Inc. retreated 2.4 percent to 121 yen, while Sumitomo Mitsui Financial Group Inc. declined 2.9 percent to 2,372 yen.
The Nikkei 225 Volatility Index (VNKY) surged 21 percent to 21.31, indicating traders expect a swing of about 6.1 percent on the benchmark gauge over the next 30 days. That’s the biggest jump since May 18. Trading volume on the gauge was 22 percent below the 100-day average.