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Japan Stock Futures Drop, Signaling Topix Correction Will Deepen

Japanese stock futures fell, indicating a correction in the Topix index will deepen, as the yen strengthened against the dollar, weakening the outlook for exporters.

American Depositary Receipts of Toyota Motor Corp., the world’s largest carmaker, slid 0.5 percent as the yen gained against the dollar from the close of equity markets in Tokyo yesterday. Shares of Aeon Mall Co. (8905) may be active after the Japanese shopping mall owner said it will sell as many as 26 million shares to invest in new stores.

Futures on Japan’s Nikkei 225 Stock Average (NKY) expiring this month traded at 13,190 in Chicago, down from 13,240 at the close in Osaka, Japan. They were bid in the pre-market at 13,180 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index were little changed as investors awaited a decision at 2:30 p.m. in Sydney from the Reserve Bank of Australia, which is forecast to keep its benchmark interest rate on hold at 2.75 percent. New Zealand’s NZX 50 Index fell 0.2 percent.

“Equities have dropped so sharply in such a short space of time and the fall below 100 yen was the key support and this is now broken,” said Stan Shamu, a Melbourne-based market strategist at IG Markets Ltd., a provider of trading services in currencies, stocks and commodities. “Officials are starting to worry a little bit. The chances are the Bank of Japan is not going to increase its asset purchases from the current level. They are in a situation where they need to talk it up.”

The Topix, Japan’s broadest equity gauge, has slumped 14 percent from May 22, when it reached the highest level since August 2008. Eight of the 33 industry groups on the measure have retreated more than 20 percent. The Nikkei 225 has fallen 15 percent since May 22.

Best Performed

Japanese equities are still the best performing among the major developed markets this year, with the Topix and Nikkei 225 up about 28 percent. Shares rallied from mid-November on optimism the government of Prime Minister Shinzo Abe and the Bank of Japan will beat 15 years of deflation.

Futures on Hong Kong’s Hang Seng Index and contracts on the Hang Seng China Enterprises Index of mainland Chinese companies trading in Hong Kong both retreated 0.1 percent. The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. climbed 1 percent in New York yesterday.

The MSCI Asia Pacific Index, the benchmark regional equities gauge, yesterday traded at 13 times average estimated earnings compared with 14.9 for the Standard & Poor’s 500 Index and 13.1 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

U.S. Futures

Futures on the S&P 500 (SPX) slid 0.2 percent. The gauge advanced 0.6 percent yesterday, reversing earlier losses, after Federal Reserve Bank of Atlanta President Dennis Lockhart said central-bank officials are committed to record stimulus measures.

“There certainly seems to be an acute fixation on the timing of any adjustment to the asset purchase program, and I guess I would just encourage everyone to not lose sight of the bigger picture,” Lockhart said Bloomberg Television in New York. “Any adjustment is not a major policy shift. The high level of accommodation will stay in place.”

The yen rose to 99.60 per dollar as of 8:02 a.m. in Tokyo, up from 100.40 at the close of Japanese equity markets yesterday.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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

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