July 4 (Bloomberg) -- Japanese stocks advanced to a two-month high after an unexpected gain in U.S. manufacturing boosted the earnings outlook for exporters and amid growing optimism Europe will agree to a further rescue plan for Greece.
Toyota Motor Corp., the world’s biggest carmaker by market value, advanced 1.5 percent. Mitsubishi UFJ Financial Group Inc. Japan’s largest bank by market capitalization, gained 2.8 percent. Mitsui Fudosan Co., the country’s No. 2 developer by market value, jumped 4.2 percent after Deutsche Bank AG said demand for high grade office space is increasing following the country’s record earthquake in March.
“The increase in the manufacturing index shows U.S. consumption is favorable, and signals the economy will further recover through the end of this year,” said Takero Inaizumi, head of equity research in Tokyo at Mizuho Investors Securities Co. “The investment environment is changing as concerns ease about a U.S. economic slowdown and Greek debt.”
The Nikkei 225 gained 1 percent to 9,965.09 at the 3 p.m. close in Tokyo, the highest level since May 2. The index earlier rose as much as 1.4 percent, breaking 10,000 at one point, before paring gains after Standard & Poor’s Rating Services said a debt rollover plan for Greece may put the country in “selective default.”
The broader Topix advanced 1.2 percent to 864.11 after an index of U.S. manufacturing gained for the first time in four months. The Topix has risen 4.7 percent in the past five trading days as Greece cleared hurdles for getting more bailout money from the European Union and Japanese companies including Toyota said they were recovering more quickly than anticipated from the disaster on March 11.
The euro area on July 2 approved its share of a 12 billion-euro ($17.4 billion) aid payment for Greece and pledged to complete work in the coming weeks on a second rescue package for the cash-strapped nation. Finance ministers agreed to disburse 8.7 billion euros of loans under last year’s 110 billion-euro bailout, rewarding Greek Premier George Papandreou for pushing budget cuts and tax increases through parliament last week.
Japanese stocks rose today after a report on July 1 showed U.S. manufacturing expanded for the first time in four months, a sign that global industry is recovering from supply chain disruptions stemming from Japan’s earthquake. The Institute for Supply Management’s factory index rose to 55.3 last month from 53.5 in May. Economists surveyed by Bloomberg forecast the index would drop to 52. Figures greater than 50 signal an expansion.
Toyota, which gets almost 30 percent of its sales in North America, advanced 1.5 percent to 3,385 yen. Honda Motor Co., a carmaker that gets more than 80 percent of its revenue overseas, jumped 3.5 percent to 3,220 yen.
Banks lent the biggest support to the Topix among its 33 industry groups. Mitsubishi UFJ gained 2.8 percent to 409 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest publicly traded lender by market value, rose 2.7 percent to 2,567 yen.
Property developers gained after Deutsche Bank said that demand for high quality office space is increasing following the magnitude-9 earthquake on March 11. More businesses are looking for space in quake resistant buildings, the bank said in a report dated July 1, citing a survey by Mori Building Co.
Mitsui Fudosan jumped 4.2 percent to 1,445 yen. Mitsubishi Estate Co., Japan’s No. 1 developer by market value, advanced 2.6 percent to 1,447 yen. Smaller rival Sumitomo Realty & Development Co. climbed 3.1 percent to 1,873 yen.
Edano Boosts Tepco
Tokyo Electric Power Co., the utility that owns the crippled Fukushima Dai-Ichi nuclear plant, surged 20 percent to 393 yen after Japan’s Chief Cabinet Secretary Yukio Edano said today he didn’t know anything about a possible government proposal to split up the company. Edano spoke after a report yesterday in the Mainichi newspaper that Edano’s deputy, Yoshito Sengoku, may recommend the company be broken up.
Exporters to Europe gave up earlier gains after the euro depreciated against the yen, falling from a near four-week high in Tokyo after S&P’s rating service said Greece might not be able to avoid a technical default by rolling over its bonds. The European currency weakened to as low as 117.13 yen in Tokyo, compared with 117.73 at the opening of stock trading.
A French proposal to have banks roll over their Greek bond holdings would put Greece in “selective default” because it would offer creditors “less value than the promise of the original securities,” S&P said in a statement today. The ratings service said it would assign a new credit rating to Greece a short time after the country refinanced its debt.
Nippon Sheet Glass Co., a glassmaker that counts Europe as its biggest market, dropped 0.4 percent to 252 yen after earlier climbing as much as 1.6 percent. Nikon Corp. finished the day up 0.7 percent, paring gains of as much as 1.7 percent. The camera maker gets almost a quarter of its sales in Europe.
“The European countries have put in so much effort the past two weeks in having a plan to help Greece, and this is just such a small technical issue,” said Alex Au, Hong Kong-based managing director of Richland Capital Management Ltd., which oversees $300 million of assets. “Eventually they will do whatever they can to solve this.”
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