Japanese shares fell, with the Nikkei 225 Stock Average halting its longest winning streak since July 2011, on concern the global economic slowdown is crimping earnings and as commodities erased this year’s gains.
Kawasaki Heavy Industries Ltd. (7012) sank 5.7 percent after the gas-turbine maker said operating profit missed its forecast as sales fell in China and Europe. Inpex Corp. (1605), Japan’s top oil explorer by market value, slid 2.1 percent after crude prices fell to near a three-month low. Sharp Co. jumped 6.4 percent on a report the electronics maker plans to sell 10 million smartphones in the Chinese market.
The Nikkei 225 fell 0.7 percent to 8,954.30 at the 3 p.m. close in Tokyo, declining for the first time in eight days. Volume was 6.3 percent above the 30-day average. The Topix Index slid 0.8 percent to 743.27, with almost two shares declining for each that gained. Stocks pared losses after a survey from HSBC Holdings Plc and Markit Economics showed manufacturing in China may have contracted at a slower pace.
“More Japanese companies are likely to cut earnings forecasts, dragged down by overseas demand as the U.S. and Chinese economies slow,” said Tomomi Yamashita, a senior fund manager at Shinkin Asset Management Co. in Tokyo, which oversees $6.5 billion. “The decline in commodities may indicate investors are no longer expecting stimulus policies and this is weighing on stock markets.”
The Topix has risen 3.4 percent from Sept. 6 as the European Central Bank, the U.S. Federal Reserve and the Bank of Japan added stimulus to boost growth. Shares on the stock gauge traded 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.
HSBC Holdings today released China’s purchasing managers’ index for October with a preliminary reading of 49.1, compared with 47.9 for the month before. A number above 50 indicates expansion. The survey may bolster prospects for the country’s growth to rebound from a three-year low after exports and production accelerated last month.
“Some investors are thinking the China’s PMI hit the bottom, fueling confidence about the economy,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo.
TDK Corp., an electronic-parts maker that gets more than 25 percent of its sales from China, slid 0.5 percent to 3,000 yen, paring earlier losses of 2 percent. Fanuc Corp. (6954), a producer of robotics for mainland factories, slid 1.2 percent to 13,040 yen after falling as much as 2.7 percent.
Futures on the S&P 500 added 0.4 percent today. The gauge declined 1.4 percent yesterday in New York, the lowest close since Sept. 5, amid disappointing earnings at companies from 3M Co. to DuPont Co. that missed expectations. The Dow Jones Industrial Average booked its biggest decline since June.
“Investor sentiments are being swayed” as major U.S. companies cut earnings forecasts in addition to the global economic slowdown, said Hiroichi Nishi, an equities manager at SMBC Nikko Securities Inc. in Tokyo.
Kawasaki Heavy sank 5.7 percent to 166 yen. The company said in a preliminary earnings statement that operating profit fell to 10.3 billion yen ($129 million), missing its estimate by 49 percent, in the six months ended Sept. 30.
Jtekt Corp. (6473) tumbled 5.8 percent to 636 yen, after the autoparts maker said net income declined to 4.5 billion yen for the six months ended Sept. 30, 55 percent below its target. The company cited reduced demand in Europe and foreign exchange losses for the results.
Japan’s earnings season peaks next week, with 570 of the 1,672 companies listed on the Topix (TPX) reporting results.
Commodities erased this year’s advance on speculation demand for energy, industrial metals and some agricultural products will slump because of the sluggish global economy. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 1.4 percent yesterday in New York. Earlier, the gauge touched 635.1, the lowest level since Aug. 3.
Energy companies declined after crude oil for December delivery declined to $86.67 a barrel in New York yesterday, the lowest settlement since July 12. Prices are down 12 percent this year.
Inpex lost 2.1 percent to 468,500 yen. Japan Petroleum Exploration Co., the nation’s second-largest oil explorer by market value, slipped 1.4 percent to 3,435 yen.
Sharp, Japan’s largest maker of liquid-crystal displays, gained the most on the Nikkei 225 (NKY), rising 6.4 percent to 167 yen. The Nikken Kogyo newspaper reported the company plans to reach an annual sales target of 10 million units in two to three years for a smartphone it’s developing for the Chinese market with Hon Hai Precision Industry Co.
The Nikkei Stock Average Volatility Index (VNKY) fell 1 percent to 19.55, indicating that traders expect a swing of 5.6 percent on the equity benchmark in the next 30 days.
-- With assistance from Masaaki Iwamoto in Tokyo. Editor: Jim Powell
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