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Nikkei 225 Slumps to One-Month Low on European Outlook

Japanese shares fell, with a fourth day of declines on the Nikkei 225 (NKY) Stock Average dragging the gauge to its lowest in a month, after the European Union’s outlook was cut by Moody’s Investors Service.

Shimano Inc. (7309), a bicycle-parts maker that relies on Europe for about a third of its revenue, declined 2.4 percent in Osaka. Inpex Corp. (1605), Japan’s biggest oil explorer, advanced 0.9 percent after Barclays Plc advised buying the shares and crude prices rose to a week high. Toyota Motor Corp. sank 0.3 percent after the automaker’s sales in China dropped 15 percent last month.

The Nikkei 225 fell 0.1 percent to 8,775.51 at the close of trading in Tokyo, the lowest since Aug. 6. Volume was 4.8 percent below the 30-day average. The broader Topix Index lost 0.3 percent to 726.69 after rising as much as 0.2 percent.

The European Central Bank “is more likely to trigger action when they meet” in two days, said Matthew Sherwood, Sydney-based head of markets research at Perpetual Investments, which oversees about $25 billion. “Whether it’s comprehensive enough to keep sentiment strong and keep markets rallying is a different issue because in the end there’s not much central banks can do to address the global debt situation.”

The Topix dropped 17 percent from this year’s peak on March 27 on concern Europe’s debt crisis is deepening as amid slowing economic expansion in China and the U.S. The gauge trades at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index. A number less than one means companies can be bought for less than the value of their assets.

Futures on the S&P 500 gained 0.2 percent today ahead of reports expected to show manufacturing growth in the world’s biggest economy. The market was shut yesterday for a holiday.

Euro Stocks

The Nikkei Stock Average Volatility Index (VNKY) slid 2.9 percent to 20.09, indicating options traders are expecting a swing of about 5.8 percent in the Nikkei 225 in the next 30 days. Strategists are forecasting the measure will end the year at 10,400, according to the average of 15 surveyed by Bloomberg.

Companies that do business in Europe declined. Shimano lost 2.4 percent to 5,590 yen. Sysmex Corp., a medical equipment maker that gets 30 percent of sales in Europe, retreated 2.5 percent to 3,525 yen.

The European Union’s outlook was cut to negative from stable by Moody’s, which cited downside risks to France and Germany, who shoulder the biggest cost of bailing out euro-zone states.

Euro leaders are continuing their shuttle diplomacy this week in efforts to save the single currency. EU President Herman Van Rompuy is traveling to Berlin for talks with German Chancellor Angela Merkel today as Italian Prime Minister Mario Monti welcomes French President Francois Hollande to Rome.

Inpex Climbs

Energy stocks gained after crude for October delivery climbed as much as 83 cents to $97.30 a barrel in electronic trading on the New York Mercantile Exchange, the highest intraday price since Aug. 27.

Inpex advanced 0.9 percent to 438,000 yen after the stock was rated new overweight, the equivalent of buy, at Barclays with a price target of 809,000 yen share.

Toyota slid 0.3 percent to 3,080 yen after the automaker said its sales in China dropped 15.1 percent to 75,300 last month.

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