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Japanese Stocks Drop on Growth Concern, Spanish Riots

Japanese stocks advanced, with the Topix (TPX) Index rebounding from its steepest drop since May, after a report of declining Chinese industrial profits fanned bets policy makers will take steps to buoy Asia’s biggest economy.

Komatsu Ltd. (6301), a maker of construction equipment that gets almost 15 percent of its sales in China, rebounded 2.3 percent. Renesas Electronics Corp. (6723) added 1.3 percent after a report a government-backed fund may invest in the unprofitable chipmaker. Nikon Corp. (7731), a camera maker that gets a quarter of its revenue in Europe, slid 1.2 percent after riots in Spain fueled concern the region’s debt crisis may worsen.

The Topix gained 0.4 percent to close at 745.59 in Tokyo after yesterday plunging 2 percent, the most since May 18. The Nikkei 225 Stock Average (NKY) rose 0.5 percent to 8,949.87, reversing a 0.7 percent loss after the China profit report.

“Investors think China will invest more in infrastructure after some reports the country will be more aggressive in spending,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has 33 trillion yen ($420 billion) in assets. “Sentiment got a little boost after Chinese markets gained.”

The Topix has fallen 2.5 percent in the last six trading days, wiping out more than a third of the the gains since Sept. 6 after the European Central Bank started a global wave of easing, announcing unlimited bond purchases to curb the debt crisis. Shares have fallen amid concern monetary stimulus won’t revive growth.

“Investors had been focused on monetary easing, but Europe’s crisis has grabbed everyone’s attention again,” said Akio Yoshino, who helps oversee the equivalent of $32 billion as chief economist at Amundi Japan Ltd. in Tokyo. “The debt crisis in Europe is deep-rooted and investors are scaling back their expectations because over and over we’re reminded there are no easy solutions.”

Spanish Protests

Japanese stocks declined earlier today after protests in Spain and Greece against spending cuts fueled concern Europe’s debt crisis may worsen. Spanish demonstrators marched for a second night in Madrid yesterday, calling on Prime Minister Mariano Rajoy to reverse austerity measures, while police in Athens dispersed protesters with tear gas.

Nikon slid 1.2 percent to 2,153 yen. Roland Corp., a maker of electronic musical instruments that gets a third of its sales from Europe, fell 0.9 percent to 559 yen.

The Bank of Spain said the economy contracted at a “significant pace” in the third quarter. Reports showed French consumer confidence dropped for a third month in September and Italian retail sales declined in July.

“‘A sudden economic rebound would come close to a miracle,’’ said Mikio Kumada, a Singapore-based global strategist for LGT Capital Management, which oversees more than $20 billion. ‘‘Agreements on fiscal policy will be much harder to achieve than the recent monetary policy decisions.’’

Stimulus Hopes

Japanese stocks reversed losses today amid speculation China may spend more on infrastructure after Chinese industrial companies’ profits dropped for a fifth month in August. Net income fell 6.2 percent from a year earlier to 381.2 billion yuan ($60.4 billion), the National Bureau of Statistics said. The number compares with a 5.4 percent decline in July and a 1.7 percent slide in June.

Komatsu rebounded 2.3 percent to 1,542 yen after a fifth- day drop. Murata Manufacturing Co. an electronic-parts maker that depends on China and Taiwan for 50 percent of its sales, gained 1.8 percent to 4,220 yen.

Chinese Regulators

Markets around the region extended gains after Shanghai Securities News reported there is speculation the China Securities Regulatory Commission will hold a press conference today to announce 10 market-boosting measures. CSRC news department official Zhang Xiaojun said he’s aware of the market talk and declined to comment further.

Renesas Electronics rose for a second day, adding 1.3 percent to 311 after Kyodo News reported a fund backed by the Japanese government and a group of companies may invest about 200 billion yen ($2.6 billion) in the unprofitable chipmaker.

Aozora Bank Ltd. declined the most in the Nikkei 225, falling 9 percent to 232 yen after the lender said its top shareholder Cerberus NCB Acquisition LP plans to sell part of its 821 million shares in the bank this year.

-- With assistance from Adam Haigh in Sydney. Editors: Jason Clenfield, Jim Powell

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net

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