Japanese Stocks Fall on Yen, Bets Fed to Cut Stimulus

Japanese stocks fell for a second day ahead of U.S. jobs data as the yen held gains and stronger economic growth fueled concerns the Federal Reserve may cut stimulus sooner than expected.

The Topix index lost 1 percent to 1,172.77 as of 9:02 a.m. in Tokyo. The measure is poised for a 0.9 percent drop this week. The Nikkei 225 Stock Average slid 1.3 percent to 14,043.39. The yen traded at 98.12 per dollar after advancing 0.6 percent yesterday. The currency also gained against the euro after the European Central Bank cut a key interest rate.

The Topix 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.

Futures on the Standard & Poor’s 500 Index were little changed today. The equity measure dropped 1.3 percent yesterday, the most since August. Data showed the economy expanded at a 2.8 percent annualized rate last quarter, exceeding the median economist forecast for 2 percent growth. The Fed has said it needs to see signs of a sustainable recovery before paring back stimulus.

Today’s monthly employment report may show payrolls rose by 120,000 workers in October after a 148,000 gain in September, while the jobless rate rose to 7.3 percent, according to a Bloomberg survey of economists.

The ECB yesterday cut its benchmark interest rate to a record low of 0.25 percent from 0.5 percent, after a drop in inflation to the slowest pace in four years threatened its mission to keep prices stable.

Earnings season continues in Japan with more than 200 companies reporting today. Of the 230 Topix companies that have announced results this quarter and for which Bloomberg had estimates, 59 percent topped profit expectations, according to data compiled by Bloomberg.

Profit per share on the gauge is expected to increase 45 percent from the previous quarter, according to analyst projections compiled by Bloomberg.

The Topix traded at 1.22 times book value yesterday, compared to 2.53 for the S&P 500 and 1.81 for the Stoxx Europe 600 Index. The Topix’s 30-day historic volatility was at 16.61 yesterday, down from its five-year median of 19.16.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net

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

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