Topix Advances Most in Three Weeks on U.S. Economic Data

Japanese stocks rose, with the Topix Index gaining the most in three weeks, as U.S. jobs and service industries data beat expectations. Shares extended gains after the yen fell.

Honda Motor Co. (7267), a carmaker that depends on North America for 44 percent of its sales, climbed 3.1 percent. Izumi Co. soared 23 percent after the shopping-center operator announced a share buyback and raised its net-income forecast. Computer- printer maker Canon Inc. (7751) fell 2.2 percent after Hewlett-Packard Co., the world’s largest manufacturer of personal computers, projected 2013 profit that missed estimates.

The Topix advanced 1.1 percent to 735.38 at the 3 p.m. close of trading, the biggest advance since Sept. 14. More than two stocks rose for each that fell on the gauge. The Nikkei 225 Stock Average (NKY) gained 0.9 percent to 8,824.59, with trading volume about 6 percent above the 30-day average.

“We are getting favorable indicators about the U.S. economy, and stocks are reacting,” said Takashi Ito, a strategist equity market at Nomura Securities Co., Japan’s biggest brokerage. “Each nation has been easing policy to reach their own targets. For the U.S. it’s employment, and that’s why markets are bound to react to the jobs data. Another good thing is the yen has weakened.”

The Topix has risen 0.9 percent this year as a wave of stimulus measures countered a slowing global economy. Shares on the gauge trade at about 0.88 times book value, compared with 2.25 for the Standard & Poor’s 500 Index and 1.51 times for the Stoxx Europe 600 Index. A number lower than one means a company can be bought for less than the value of its assets.

BOJ Meeting

The Bank of Japan is scheduled to end a two-day policy meeting tomorrow after last month boosting its asset-purchase program by 10 trillion yen to 55 trillion yen. Political leadership changes and deepening pessimism among manufacturers is pushing the central bank to do more to combat deflation and spur growth.

“The bias is for the BOJ to add to easing measures as political pressure mounts,” said Fumio Matsumoto, a fund manager who helps oversee about 100 billion yen ($1.27 billion) in domestic equities at T&D Asset Management Co. “There aren’t many Japanese companies growing, while some are expanding gradually. The yen’s level isn’t that favorable, Europe is struggling, and China is slowing,” sapping capital flows into Japanese equities.

Futures on the S&P 500 (SPXL1) added 0.4 percent today. The index gained 0.4 percent in New York yesterday, when ADP Employer Services said U.S. companies added 162,000 jobs last month, exceeding the median estimate of economists surveyed by Bloomberg. Service industries in the U.S. also expanded more than projected.

Employment Outlook

The Federal Reserve last month said it will buy $40 billion of mortgage-backed securities each month until the U.S. labor market recovers. The jobless rate in the U.S. probably rose to 8.2 percent last month from 8.1 percent in August, economists said ahead of a government jobs report due tomorrow. Payrolls probably increased by 115,000, economists predict.

Shares extended gains as Japan’s currency fell against all 16 of its major counterpart. A weaker yen boosts the value of overseas earnings at Japanese exporters.

Carmakers rose the most among the Topix’s 33 industry groups. Honda added 3.1 percent to 2,433 yen, while Nissan Motor Co. (7201) gained 5.1 percent to 679 yen.

Izumi surged 23 percent to 2,013 yen, its biggest gain since at least 1987. The company plans to buy back as much as 8 billion yen in shares and raised its fiscal-year net-income forecast to 16.5 billion yen from 14.5 billion yen.

Earnings season starts this month with 131 companies on the Topix set to report results on Oct. 26, according to data compiled by Bloomberg.

Canon Drops

Among stocks that fell, Canon dropped 2.2 percent to 2,500 yen after Hewlett-Packard Chief Executive Officer Meg Whitman said a turnaround at the computer maker won’t happen any time soon. Earnings for the 2013 fiscal year will be $3.40 to $3.60 a share, compared with an estimated $4.16 a share, according to a Bloomberg survey. Hewlett-Packard plunged 13 percent to $14.91 yesterday, a 10-year low.

The Nikkei Stock Average Volatility Index (VNKY) dropped 4 percent to 17.43, indicating traders expect a swing of about 5 percent on the benchmark gauge over the next 30 days.

To contact the reporter on this story: 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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