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Japan’s Nikkei 225 Posts Biggest Two-Day Drop Since 2011

The Nikkei 225 Stock Average (NKY) fell, posting its biggest two-day drop since November 2011, as the yen strengthened ahead of an Italian bond sale after inconclusive elections stoked European debt crisis concern.

Toyota Motor Corp., the world’s biggest automaker, lost 2.3 percent. Kawasaki Kisen Kaisha Ltd. dropped 4.2 percent after the shipping line yesterday rose to its highest in 18 months. Hokkaido Electric Power Co. (9509) gained after its rating was raised at Mitsubishi UFJ Morgan Stanley Securities Co.

The Nikkei 225 slipped 1.3 percent to close at 11,253.97 in Tokyo. Volume was 26 percent below the 30-day average. The gauge slid 3.5 percent since Feb. 25, when it rose to a four-year high. The broader Topix Index fell 1.4 percent to 953.72 today, with two shares falling for each that rose.

“There’s concern among investors that Europe will roil financial markets again,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has 33 trillion yen ($359 billion) in assets. “The weaker euro is having a big negative effect on stocks. Investors are going to want to stay away from risk while things are unclear.”

The Topix surged 32 percent since Nov. 14 amid optimism Prime Minister Shinzo Abe and the central bank will lead the country out of deflation. The measure is trading at 1.1 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 for the Stoxx Europe 600 Index.

Italy Bond Sale

Italy will test markets today with the sale of long-term debt after borrowing costs rose to the highest in four months yesterday. Elections this week resulted in a hung parliament, renewing concern the nation will abandon austerity.

Japanese exporters declined as the yen strengthened 0.1 percent against the euro today and 0.2 percent against the dollar. A stronger yen cuts the earnings outlook for Japan’s exporters.

Toyota lost 2.3 percent to 4,605 yen, the biggest drag on the Topix. Canon Inc. (7751), a camera maker that gets 29 percent of its sales in Europe, sank 2.7 percent to 3,235 yen. Nintendo Co., a gamemaker that counts Europe as its second biggest market behind the Americas, dropped 1.5 percent to 8,930 yen.

The Topix surged 30 percent since Nov. 14 amid optimism Prime Minister Shinzo Abe and the central bank will lead the country out of deflation. The measure is trading at 1.1 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 for the Stoxx Europe 600 Index.its revenue from Europe, fell 1.5 percent to 8,930 yen.

Futures on the S&P 500 Index slid 0.1 percent. The U.S. equity gauge advanced 0.6 percent yesterday as data showed purchases of new homes last month jumped to the highest level since July 2008 and consumer confidence surged in February.

Kawasaki Kisen Drops

Kawasaki Kisen (9107) sank 4.2 percent to 208 yen, retreating after yesterday rising to its highest level since August 2011. The company’s investment rating was also lowered to neutral from buy at Ji-Asia Research Ltd.

Hokkaido Electric jumped 5.6 percent to 825 yen after Mitsubishi UFJ recommended shares of the utility, citing future power rate increases.

Cable-maker Fujikura Ltd. jumped 9.4 percent to 291 yen, the biggest gain on the Nikkei 225, after announcing plans to buy back 2.9 percent of its shares.

The Nikkei Stock Average Volatility Index (VNKY) gained 3.3 percent to 29.24, indicating traders expect a swing of about 8.3 percent of the benchmark gauge over the next 30 days.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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

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