Japan Stocks Advance Before Policy Reviews From Fed, ECB

Japanese stocks rose for a fourth day amid speculation the Federal Reserve and the European Central Bank may signal moves to stimulate economic growth. Shares also gained as Japan’s jobless rate unexpectedly fell.

Honda Motor Co. (7267), a carmaker that gets about a half of its sales from North America and Europe, rose 2.1 percent. Hokuriku Electric Power Co. soared 14 percent after first-quarter earnings rose. Mitsui O.S.K. Lines Ltd. (9104), Japan’s second-biggest shipping line by revenue, added 2.1 percent after reporting losses narrowed. Canon Inc. (7751), the world’s biggest camera maker, surged 5.8 percent after saying it will buy back shares.

The Nikkei 225 Stock Average (NKY) gained 0.7 percent to 8,695.06 at the 3 p.m. close of trading in Tokyo. The gauge lost 3.6 percent this month, the worst performance in the period after Spain among the 24 benchmark developed-market equity indexes tracked by Bloomberg News. The broader Topix (TPX) today rose 0.6 percent to 736.31, reversing an earlier 0.5 percent decline.

“Investors may be buying on expectations the U.S. and Europe may ease monetary policy,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has 33 trillion yen in assets. “Japanese stock prices are lagging those in the U.S. and Europe, so this may be driving the market.”

Shares also gained as Japan’s jobless rate unexpectedly declined in June to 4.3 percent, beating analyst expectations that unemployment would remain flat at 4.4 percent.

The Topix lost 16 percent since March 27, leaving the gauge trading at 0.9 times book value, compared with 2.2 times for the S&P 500 and 1.4 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than value of their assets.

U.S. Jobs

Futures on the Standard & Poor’s 500 Index (SPXL1) added 0.3 percent today. The gauge lost less than 0.1 percent in New York yesterday, snapping a two-day rally, ahead of an Aug. 3 report that may show the pace of hiring in July failed to reduce the U.S. jobless rate.

The Federal Open Market Committee will announce a policy decision tomorrow, and the European Central Bank will convene on Aug. 2. U.S. Treasury Secretary Timothy F. Geithner and German Finance Minister Wolfgang Schaeuble backed a commitment by European leaders to do everything needed to defend the euro area while failing to mention Greece, its weakest link.

Honda rose 2.1 percent to 2,551 yen. Kyocera Corp. (6971), an electronic components maker that earns almost a third of its revenue from the U.S. and Europe, climbed 1.6 percent to 6,250 yen. Asahi Glass Co., which gets more than 25 percent of its sales from the U.S. and Europe, jumped 3.4 percent to 463 yen.

Market Focus

“At the moment, the markets are really focused on central bank actions rather than the economic environment,” said Matthew Sherwood, head of markets research at Sydney-based Perpetual Investments, which manages about $25 billion. “The problem in the global economy is the solvency of balance sheets of the government and banks around the world.”

Today was the busiest day in Japan’s earnings season, with 271 of the 1,672 companies listed on the Topix reporting. Of the 124 companies that have reported since July 1 that have issued forecasts, 48 percent have exceeded expectations, according to Bloomberg data.

Hokuriku Electric (9505) soared 14 percent to 799 yen, the biggest gain since June 1988, after operating profit in the quarter ended June 30 jumped 58 percent to 16.8 billion yen ($215 million) due to lower costs. The stock rebounded from a 21 percent drop on July 18 on a report there may be an active fault under one of the utility’s reactors.

Mitsui O.S.K. added 2.1 percent to 239 yen after its first- quarter operating loss narrowed to 503 million yen from 8.6 billion yen a year earlier. The shipping line revised its first- half forecast to a 1 billion yen operating profit from a 1 billion yen loss, citing improved container rates and lower fuel costs.

Canon Buyback

Canon climbed 5.8 percent to 2,650 yen, the heaviest contributor to the Nikkei 225’s gain, after saying it will spend 50 billion yen to buy back as much as 1.8 percent of its outstanding shares through Sept. 10.

Banking shares were the second-biggest decliners among the Topix’s 33 industry groups. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, fell 1 percent to 381 yen after Deutsche Bank AG and UBS AG reported second-quarter profit that fell short of analysts’ estimates.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

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

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