Japan’s Topix Snaps Two-Day Rally as Shippers Retreat

Japan’s Topix index fell, snapping a two-day rally, as investors weighed corporate earnings and shipping companies and builders led losses.

Nippon Yusen K.K. fell 2.4 percent after a measure of commodity shipping rates dropped for a fourth day yesterday. Obayashi Corp. sank 4.4 percent, the most on the Nikkei 225 Stock Average, as construction shares extended losses. Sumitomo Mitsui Financial Group Inc. (8316) gained 1.6 percent after the country’s second-biggest lender by market value raised its full-year profit forecast 29 percent.

The Topix slid 0.1 percent to close at 1,204.19 in Tokyo after climbing as much as 0.4 percent. Volume was 9.6 percent above the 30-day intraday average. The measure yesterday posted its largest advance in two weeks, rising 1.7 percent. The Nikkei 225 today slid 0.2 percent today to 14,567.16. The yen climbed 0.1 percent to 99.51 per dollar after three days of losses. Federal Reserve Bank of Atlanta President Dennis Lockhart said yesterday stimulus may be reduced next month.

“More people think the U.S. recovery is gathering pace and the yen has also weakened, both of which are good for Japanese exporters,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-biggest lender by market value. “But stocks have risen at a fast pace since the start of the week and speculation is growing that the U.S. will cut back on quantitative easing earlier.”

Stimulus Outlook

Futures on the Standard & Poor’s 500 Index retreated 0.3 percent. The measure lost 0.2 percent yesterday as corporate earnings and an improving economy fueled speculation the Fed will reduce bond purchases next month. Investors will scrutinize U.S. economic reports this week on jobless-benefit claims and manufacturing in the New York area. Dallas Fed President Richard Fisher said in a speech in Melbourne that monetary accommodation “becomes riskier by the day.”

The Topix is the best-performing developed equity market in 2013, surging 40 percent, amid optimism Prime Minister Shinzo Abe’s policies and Bank of Japan monetary easing will lead the country out of deflation.

More than 800 Topix companies have released earnings this month, according to data compiled by Bloomberg. Of the companies on the gauge that have reported quarterly earnings this season and for which Bloomberg has analyst estimates, 61 percent beat profit expectations, data compiled by Bloomberg show.

Building stocks fell a second day. Obayashi sank 4.4 percent to 562 yen, extending a 3 percent loss from the day before when the company cut its operating-profit forecast. Kajima Corp., another construction company, lost 4.4 percent to 372 yen. Taisei Corp. declined 3.1 percent to 469 yen.

Shippers Slide

A Topix group tracking shipping lines lost 1.6 percent, the most among the broader equity gauge’s 33 subsectors, after the Baltic Dry Index (BDIY) slid 1.3 percent yesterday for a fourth day of losses. Nippon Yusen, Japan’s largest company in the sector, sank 2.4 percent to 291 yen. Mitsui OSK Lines Ltd., the second biggest, slipped 1.4 percent to 410 yen.

Sumitomo Mitsui gained 1.6 percent to 4,945 yen. Net income will probably total 750 billion yen ($7.5 billion) in the year ending March 31, the Tokyo-based bank said yesterday. That compares with the 580 billion yen previously forecast and the 696.7 billion-yen average estimate of 19 analysts surveyed by Bloomberg. Resona Holdings Inc. climbed 0.8 percent to 516 yen after raising its net-income forecast by 28 percent to 185 billion yen.

Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., the first- and third-largest lenders, respectively, are scheduled to post earnings tomorrow.

Pioneer Surges

“Banking shares with large market capitalizations are performing strongly overall, and that’s having a positive impact mainly on domestic demand-driven industries,” said Kenji Shiomura, a Tokyo-based senior strategist at Daiwa Securities Group Inc., Japan’s second-largest brokerage.

Pioneer Corp. surged 22 percent to 202 yen, its biggest gain since May. The maker of car stereos posted operating profit of 569 million yen for the six months ended September, while analysts had expected a 2.5 billion-yen loss, according to data compiled by Bloomberg.

Seiko Holdings Corp. (8050) surged 9.4 percent to 502 yen, its highest close since July. The watchmaker yesterday more than doubled its net-income forecast to 11 billion yen.

Brother Industries Ltd. (6448) jumped 4.5 percent to 1,124 yen after Credit Suisse Group AG advised buying the sewing-machine maker’s shares.

Orders for Japanese machinery fell more than forecast in September, a report showed today, slipping 2.1 percent from the previous month. Economists surveyed by Bloomberg had expected a 1.8 percent decline.

Machine Orders

“The drop in machinery orders in September was in line with market expectations,” said Kenji Shiomura, a Tokyo-based senior strategist at Daiwa Securities Group Inc., Japan’s second-largest brokerage. “They may be slightly down on the median estimate, but this is a very volatile data series and the impact on Japanese stocks will be limited.”

Komatsu Ltd., which makes excavators and bulldozers, added 0.5 percent to 2,171 yen. Hitachi Construction Machinery Co. advanced 0.4 percent to 2,093 yen.

The Topix (TPX)traded at 1.23 times book value today, compared with 2.55 for the S&P 500 and 1.80 for the Stoxx Europe 600 Index yesterday.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@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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