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Japan Stocks Fall Amid Drop in Manufacturers’ Sentiment

 Japanese stocks fell, with the Nikkei 225 Stock Average closing at a three-week low, after a survey showed declining sentiment among the nation’s biggest manufacturers and as China’s factory output contracted amid a global economic slowdown that sapped export demand.

Komatsu Ltd., a construction-machinery maker that gets 14 percent of its sales in China, slid 1 percent. Nippon Shokubai Co. plunged 13 percent after a deadly fire shut output at one of the chemical maker’s factories. Olympus Corp. gained 1.3 percent on Sony Corp.’s plan to invest 50 billion yen ($642 million) in the endoscope maker.

The Nikkei 225 dropped 0.8 percent to 8,796.51 as of the trading close in Tokyo, the lowest since Sept. 6. Trading volume was 15 percent below the 30-day average as markets in China, Hong Kong and South Korea were closed for a holiday. The broader Topix Index slid 0.7 percent to 732.35, with about three stocks falling for each that gained.

“Japan’s production and exporters are taking direct hits from the global economy, and that’s why it’s hard to see the tide change,” said Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management Corp., which oversees about 5 trillion yen. “You find it hard to be bullish on Japanese stocks down the road.”

The Topix fell 4.2 percent in the three months through September as China’s slowdown and Europe’s debt crisis outweighed stimulus measures deployed by the Bank of Japan and its global counterparts. Stocks in the measure are valued at 12.6 times estimated earnings on average, compared with 13.9 times for the S&P 500 and 11.9 times for the Stoxx Europe 600 Index.

Manufacturers’ Sentiment

Stocks fell after the Bank of Japan’s Tankan index of sentiment among large manufacturers fell in the quarter ended September to minus 3 from minus 1, the fourth consecutive negative reading, the central bank said today in Tokyo.

China’s manufacturing contracted a second month for the first time since 2009, a government survey indicated. The Purchasing Managers’ Index was 49.8 in September after a 49.2 reading in August, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. A reading below 50 signals contraction.

“People still have to downgrade their assumptions for economic growth, and that will probably flow through the next quarter or next half in lower profit assumptions for companies,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Given markets are closed in many parts of Asia, I think we are probably in for a relatively quiet but soft start to the week.”

Machinery Makers

Machinery makers fell. Komatsu dropped 1 percent to 1,521 yen. Hitachi Construction Machinery Co., which gets 17 percent of its revenue out of China, fell 1.7 percent 1,241 yen. Sumitomo Heavy Industries Ltd. slid 0.8 percent to 265 yen.

Futures on the S&P 500 fell 0.3 percent today. The index dropped 0.5 percent in New York on Sept. 28, capping the biggest weekly loss since June, after reports showed business activity unexpectedly contracted in September and consumer spending stalled in August as a surge in gasoline prices squeezed paychecks.

Nippon Shokubai plunged 13 percent to 757 yen, the biggest decline on the Topix, after a fire at its Himeji plant in western Japan killed a firefighter and injured 33 people. All output at the factory was halted.

Among shares that rose, Olympus gained 1.3 percent to 1,540 yen. Sony aims to partner with Olympus on a medical-devices joint venture with a projected 200 billion yen in revenue by 2020, Chief Executive Officer Kazuo Hirai said today. Sony slid 0.2 percent to 917 yen.

Shares pared losses after Prime Minister Yoshihiko Noda today announced a new cabinet, including Koriki Jojima, Japan’s fifth finance minister in three years, to deal with a stalling recovery and strong yen.

The Nikkei Stock Average Volatility Index rose 4 percent to 18.58, indicating traders expect a swing of about 5.3 percent on the benchmark gauge over the next 30 days.

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