Most Japanese Stocks Decline on ECB Plan, China Outlook
Most Japanese stocks declined after growth estimates for China’s economy were cut by Goldman Sachs Group Inc. and amid speculation European Central Bank President Mario Draghi will today announce unlimited bond purchases to tame the region’s debt crisis.
Daikin Industries Ltd., an air-conditioning equipment maker that gets 18 percent of its revenue in China, dropped 1.8 percent. Makita Corp., the power-tools maker that relies on Europe for more than 40 percent of its sales, gained 0.8 percent. Yamaha Motor Co., Japan’s second-largest motorcycle manufacturer, surged the most in more than three years after the chief executive officer said sales in Indonesia will most likely exceed its target.
Almost two shares fell for every one that rose on the Topix index, the country’s broader stock gauge, which gained 0.1 percent to 719 at the close in Tokyo. The Nikkei 225 Stock Average (NKY) increased less than 0.1 percent to 8,680.57. Draghi will propose that the ECB buy government debt while refraining from a public cap on yields, according to two central bank officials briefed on the plan before the meeting today.
The bond plan “may be a constructive development for the markets,” Stephen Roach, Yale University professor and former non-executive chairman for Morgan Stanley in Asia, said in a Bloomberg TV interview. “But the jury is out on whether these types of unconventional actions really make a meaningful difference for the real economy. The action on Thursday in Europe is probably going to be quite close to the expectations that have already been discounted in the market.”
The Topix dropped 18 percent from this year’s peak on March 27 on concern Europe’s debt crisis is deepening and growth is slowing 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 Stoxx Europe 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 rose 0.3 percent today. The index fell 0.1 percent in New York yesterday after FedEx Corp., a delivery company viewed as a bellwether for the U.S. economy, projected its first drop in quarterly earnings in three years. U.S. shares also fell on London-based Markit Economics’ report that euro-area services and manufacturing contracted more than initially estimated in August.
Companies that do business in Europe gained. Makita advanced 0.8 percent to 2,677 yen. Shimano rose 0.5 percent to 5,640 yen. Toshiba Tec Corp., the maker of scanners and bar-code machines that gets 20 percent of revenue from Europe, gained 4.4 percent to 332 yen.
Draghi’s ECB bond-buying proposal involves unlimited purchases of government debt that will be sterilized to assuage concerns about printing money, two central bank officials briefed on the plan said. To sterilize the bond purchases, the ECB will remove from the system elsewhere the same amount of money it spends, ensuring the program has a neutral impact on the money supply. The central bank convenes today.
Stocks linked to China fell after estimates for the nation’s 2012 economic growth were cut to 7.6 percent from 7.9 percent, Goldman Sachs economists Li Cui, Yu Song, MK Tang and Yin Zhang wrote in a note to clients. Shares also fell after the government cut its target for industrial output to 10 percent from 11 percent, citing weakening demand at home and abroad.
Daikin Industries declined 1.8 percent to 1,994 yen. Toyota Tsusho Corp., that makes 15 percent of sales in China, slid 0.5 percent to 1,563 yen.
Investors are also awaiting U.S. unemployment data tomorrow. Payrolls are expected to have grown at a weaker pace in August with unemployment topping 8 percent for a 43rd month, economists estimated before the Labor Department report on Sept. 7. Federal Reserve Chairman Ben S. Bernanke said last week he wouldn’t rule out more stimulus to revive growth.
Sharp Corp., the loss-making electronics company renegotiating a stake sale to Foxconn Technology Group, fell 4.3 percent to 200 yen to lead declines on the Nikkei 225. Sharp’s short-term credit ratings were cut by Moody’s Investors Service and the company put up properties as debt collateral.
Yamaha Motor soared 11 percent to 727 yen. President and CEO Hiroyuki Yanagi said today the Iwata City, Japan-based company expects sales in Indonesia to “slightly outperform” its target of 2.4 million units in the year to Dec. 31.
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