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Japan’s Topix Falls on Earnings Before U.S. Economic Data

Japan’s Topix index fell, paring yesterday’s gain, as earnings forecasts disappointed investors ahead of U.S. growth and jobs data that may provide clues as to when the Federal Reserve will start cutting stimulus.

Toyota Motor Corp. (7203), the world’s biggest car manufacturer, lost 1.3 percent after its net-income forecast missed estimates. Casio Computer Co., which makes watches and calculators, declined 2.9 percent after raising its profit outlook less than analysts expected. Toray Industries Inc., the producer of carbon fiber used in Boeing Co.’s 787 Dreamliner, jumped 5.7 percent after profit surged.

The Topix slid 0.6 percent to 1,184.73 at the close in Tokyo after rising 0.8 percent yesterday. All but four of the 33 industry groups fell, with volume 11 percent below the 30-day average. The Nikkei 225 Stock Average dropped 0.8 percent to 14,228.44. The U.S. releases gross domestic product data today and employment figures tomorrow.

“The market is simply falling without any catalysts after gaining yesterday,” said Kenji Ueno, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co. “The market has traded in a tight range recently and it’s hard for it to make a big move. Individual stocks are moving a lot due to earnings while the market is directionless as a whole.”

The Topix (TPX) trailed 23 other developed markets tracked by Bloomberg in October, rising less than 0.1 percent. The measure remains the best performer this year in the group with a 38 percent rally. Shares rose as unprecedented monetary easing by the Bank of Japan weakened the yen, improving the earnings outlook for exporters.

Earnings Season

Earnings season continues in Japan with more than 300 companies reporting today and tomorrow. Profit per share on the gauge is expected to increase 46 percent from the previous quarter, according to analyst projections compiled by Bloomberg.

Toyota fell 1.3 percent to 6,270 yen after saying yesterday net income will probably rise to 1.67 trillion yen ($17 billion) this fiscal year, 13 percent higher than its previous forecast. The average of 22 analyst estimates was 1.82 trillion yen.

Casio lost 2.9 percent to 925 yen after forecasting annual net income of 13.5 billion yen, while analysts expected a 14.8 billion yen gain.

Toray jumped 5.7 percent to 647 yen, the biggest rally since April, after saying second-quarter profit rose 62 percent as demand for carbon fiber grew. Net income climbed to 16.1 billion yen in the three months ended Sept. 30 from 9.9 billion yen a year ago, the company said in a statement today. Sales advanced 16 percent to 451 billion yen.

New Index

Japan Exchange Group Inc., the main bourse operator in the world’s second-biggest equity market, and Nikkei Inc. will create an index that selects members based on return on equity in a bid to highlight the nation’s best stocks. The measure, set to start on Jan. 6, will have 400 shares, with 386 Tokyo Stock Exchange first section companies, one from the second section, two from the TSE Mothers market and 11 from Jasdaq, the company said in a statement yesterday.

Companies not included in the Topix that were selected for the new index gained. CyberAgent Inc., an Internet company listed on the TSE Mothers Index, rose 1.9 percent to 3,415 yen. GungHo Online Entertainment, a maker of online games that trades in the Jasdaq market, added 2.5 percent to 57,900 yen, snapping a six-day loss.

Futures on the Standard & Poor’s 500 Index slid 0.1 percent today. The equity measure climbed 0.4 percent and the Dow Jones Industrial Average closed at a record high yesterday after two separate papers by members of the Federal Reserve board argued the need to maintain loose monetary policy to support growth in the world’s biggest economy.

Fed Outlook

William English, head of the Division of Monetary Affairs, supported the central bank’s strategy of maintaining low interest rates while unemployment is above 6.5 percent and wrote that an even lower threshold may be helpful. Another paper by David Wilcox said the weakness of the U.S. economy calls for a “highly accommodative monetary policy.”

Data today may show U.S. GDP grew at a 2 percent annualized rate after a 2.5 percent pace in the second quarter, according to the median forecast of economists surveyed by Bloomberg. Payrolls probably rose by 120,000 workers last month after a 148,000 gain in September, while the jobless rate climbed to 7.3 percent, Labor Department figures are expected to show tomorrow.

The Topix traded at 1.22 times book value today, compared to 2.56 for the S&P 500 and 1.81 for the Stoxx Europe 600 Index yesterday. The Topix’s 30-day historic volatility was at 16.61 today, down from its five-year median of 19.16.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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