Japan Stocks Swing From Gains, Losses on Honda Outlook

Japan’s two main stock indexes fell, reversing morning gains, as Honda (7267) Motor Co. plunged after cutting its annual profit forecast. The declines were limited on expectations the Bank of Japan will add stimulus at a policy meeting tomorrow.

Honda, Japan’s third-largest carmaker by revenue, sank 4.7 percent after reducing its outlook as Chinese consumers shun Japanese vehicles amid a territorial dispute between Asia’s two- biggest economies. NTT DoCoMo Inc. (9437), Japan’s top mobile-phone company, declined the most on the Nikkei 225 Stock Average after cutting its profit forecast. NEC Corp. (6701), a maker of wireless stations, jumped 5.7 percent after boosting second-quarter profit 38 percent on the sale of display panel-related patents and cost cuts.

“Basically, investors are in a wait-and-see stance,” said Yoshihiro Ito, chief strategist at Okasan Online Securities Co., a unit of Okasan Securities Group Inc. in Tokyo. “People had expected the earnings would be bad but some investors used it as an excuse to sell shares.”

The Nikkei 225 Stock Average (NKY) fell less than 0.1 percent to 8,929.34 at the 3 p.m. close, with volume more than 20 percent below the 30-day average. The broader Topix (TPX) Index slid 0.1 percent to 740.30 after rising as much as 0.6 percent earlier.

The Topix has risen 3 percent since Sept. 6 after the European Central Bank started a global wave of easing to boost growth, with the U.S. Federal Reserve and the Bank of Japan following suit. 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.

BOJ Meeting

Bank of Japan Governor Masaaki Shirakawa’s board is facing political pressure to ease policy as government data last week showed consumer prices fell for a fifth straight month. The breakeven rate suggests that inflation will remain below the BOJ’s 1 percent goal even in 2017. All but one of 27 economists surveyed by Bloomberg News expect the central bank to increase asset purchases at its policy meeting tomorrow.

Honda sank 4.7 percent to 2,399 yen, the heaviest drag in the Topix, after saying net income will probably reach 375 billion yen ($4.7 billion) in the year ending March, 20 percent lower than its forecast in July. Carmakers declined the most in the Topix’s 33 industry groups. Toyota Motor Corp. (7203) fell 1.6 percent to 3,030 yen. Nissan Motor Co. lost 2.2 percent to 670 yen.

Japan’s current earnings season peaks this week, with 571 of the 1,672 Topix companies reporting results. Of the 111 companies on the Topix which have reported quarterly revenue since Oct. 1, and for which Bloomberg News has estimates, 65 percent have fallen short of projections.

NTT, NEC

NTT DoCoMo sank 6 percent to 116,000 yen after cutting its annual net income forecast 9 percent to 507 billion yen as competitors lured customers with Apple Inc.’s iPhone 5.

NEC gained the most in the Nikkei 225, rising 5.7 percent to 148 yen, after saying net income rose to 25.9 billion yen for the three months ended Sept. 30 from 18.7 billion yen a year earlier. NEC sold the patents to a Hon Hai Precision Industry Co. unit for 9.45 billion yen, Taipei-based Hon Hai said Sept. 28.

Nippon Sheet Glass Co. rose 3.3 percent to 62 yen after the Nikkei newspaper said on Oct. 27 the company may post July- September operating loss of about 3 billion yen, narrower than expected its 4.5 billion yen loss, due to cost cuts.

Nippon Sheet, a glassmaker that generates about 40 percent of its sales in Europe, said on Oct. 26 it will shut automotive glass plants in Finland and Sweden by the end of 2013, citing decline in demand.

‘Frankenstorm’

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today as investors braced for the impact of Hurricane Sandy. The U.S. securities industry canceled equity trading on all markets today, moving to protect workers as Hurricane Sandy barreled toward New York City with 70-mile-per-hour winds and the threat of an 11-foot surge.

The last time the NYSE cut trading hours for weather was Jan. 8, 1996, when a blizzard dropped more than 20 inches of snow on New York City.

U.S. gross domestic product, the value of all goods and services produced, rose at a 2 percent annual rate after climbing 1.3 percent in the prior quarter, Commerce Department figures showed on Oct. 26 in Washington. The median forecast of 86 economists surveyed by Bloomberg was for a 1.8 percent gain.

“The 2 percent growth of U.S. GDP was certainly good as the headline, but the contents showed the pace of recovery is much as people expected,” said Masaru Hamasaki, Tokyo-based chief strategist at Toyota Asset Management Co., which manages the equivalent of $23 billion. “Domestic demand was largely supported by military expenses. The U.S. economy is not bad but not good, either.”

The Nikkei Stock Average Volatility Index (VNKY) slid 0.5 percent to 20.38, indicating that traders expect a swing of 5.8 percent on the equity benchmark in the next 30 days.

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

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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