Nikkei 225 Falls Most in Three Weeks as Yen Jumps on Euro

Japanese shares slid, with the Nikkei 225 (NKY) Stock Average capping the biggest loss in 10 months, as the yen strengthened after an unprecedented levy on bank deposits in Cyprus threatened to plunge Europe back into crisis.

Toyota Motor Corp., the world’s largest automaker, fell 3.4 percent after the yen gained against all its major peers. Nippon Sheet Glass Co., which gets 41 percent of its revenue from Europe, lost 3.7 percent. Sharp Corp. dropped 2.5 percent after the unprofitable display maker said a 5 billion yen ($53 million) investment from Qualcomm Inc. has been delayed. Dainippon Screen Manufacturing Co. led losses on the Nikkei 225 after the equity rating for the maker of semiconductor equipment was cut at Credit Suisse Group AG.

The Nikkei 225 fell 2.7 percent to close at 12,220.63 in Tokyo, its biggest drop since May 18. The measure reached its highest level since Sept. 8, 2008, on March 15. Volume today was 26 percent below the 30-day average. The Topix Index (TPX) lost 2.2 percent to 1,028.34, with all 33 industry groups retreating.

“Policy makers are using bitter medicine for Cyprus, raising concern they may do the same with other nations,” said Tetsuo Seshimo, a Tokyo-based portfolio manager at Saison Asset Management Co., which oversees about 70 billion yen ($741 million). “Japanese stocks are giving up some of the gains from a weaker yen.”

The Topix rallied 42 percent from Nov. 14, when elections were announced that returned Prime Minister Shinzo Abe to power, fueling optimism the new government will do more to beat deflation. The gauge is trading at 1.2 times book value, compared with 2.2 times for the Standard & Poor’s 500 Index (SPX) and 1.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Euro Drops

The euro dropped to its lowest this year against the dollar and the yen rose against all of its major counterparts. The 17- nation bloc’s finance ministers reached an agreement on March 16 forcing depositors in Cypriot banks to share the cost of the latest euro-zone bailout. While Cyprus accounts for less than half a percent of the region’s economy, the raid on banks risks new convulsions in the debt crisis that began in 2009 in Greece.

Exporters were the biggest drags on the Topix today. Toyota, which gets about 70 percent of its revenue abroad, slid 3.4 percent to 4,850 yen. Canon Inc., the world’s largest camera maker, lost 2.2 percent to 3,385 yen. Nippon Sheet Glass declined 3.7 percent to 105 yen.

Sharp dropped 2.5 percent to 307 yen after saying a second investment from communication maker Qualcomm has been delayed because the companies failed to meet terms of their original agreement. Qualcomm agreed in December to invest 9.9 billion yen in Sharp, which is struggling to restore its balance sheet amid record losses and dwindling television demand.

Dainippon Screen

Dainippon Screen slumped 7.5 percent to 445 yen after semiconductor equipment maker’s rating and target price were cut at Credit Suisse, which cited a possible slowdown as chip foundries may revise capital investment plans.

Among stocks that rose, Panasonic Corp. added 0.6 percent to 692 yen on a Nikkei report it may withdraw from the plasma TV market in fiscal year 2014. The company is also considering “various options” for the growth of its health care unit, spokeswoman Megumi Kitagawa said yesterday, declining to comment on a report the business may be sold.

Water Direct Corp. (2588), which delivers mineral water to homes and offices, surged 152 percent to 3,025 yen, compared with an initial public offer price of 1,200 yen. The shares went untraded on their March 15 debut after buy orders exceeded those to sell.

Futures on the Standard and Poor’s 500 Index lost 1.2 percent today. The U.S. equity gauge fell from a five-year high on March 15 after consumer confidence unexpectedly dropped.

The Nikkei Stock Average Volatility Index rose 16 percent to 26.11 today, indicating traders expect a swing of about 7.5 percent on the benchmark gauge over the next 30 days.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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

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