Japan Stocks Retreat Amid Mixed Signals on Spain Bailout

 Japanese stocks fell a fourth day, with the Nikkei 225 Stock Average capping the longest-losing streak in a month, as the global slowdown weighs on earnings at companies from Nippon Paper Group Inc. to retailer Uny Co.

Nippon Paper paced declines among makers of cardboard and pulp products on a report it may miss a profit forecast. Uny plunged 11 percent after the operator of department stores predicted earnings that lagged analyst estimates. Daiichi Sankyo Co. lost 5.4 percent dropped after halting development of a lung-cancer treatment. Japan Petroleum Exploration Co. climbed 5.3 percent on a report it succeeded in trial extraction of shale oil in the country.

The Nikkei 225 fell 0.5 percent to 8,746.87 at the 3 p.m. close in Tokyo. Volume was about 11 percent below the 30-day average with markets in China and South Korea shut for holidays. The broader Topix Index dropped 0.5 percent to 727.39, with about three stocks declining for each that rose.

“The domestic economy and earnings are not going well, keeping a lid on the market,” said Shintaro Takeuchi, portfolio investment group manager at Tokio Marine & Nichido Fire Insurance Co. that manages 8.67 trillion yen ($111 billion) in assets. “We are not seeing a big selloff, but Japanese stocks are lagging behind.”

Relative Value

While the Standard & Poor’s 500 Index has advanced 15 percent this year, Japan’s Topix has fallen 0.2 percent as monetary easing in the U.S. and Europe drove up the yen and hurt exporters’ earnings. Topix shares trade for about 0.9 times book value on average, compared with 2.24 for the S&P 500 and 1.5 times for the Stoxx Europe 600 Index.

Futures on the S&P 500 fell 0.3 percent today. The index added 0.1 percent in New York yesterday as a rebound in Apple Inc. overshadowed disappointment after Spanish Prime Minister Mariano Rajoy said a bailout request is not imminent. Spanish regional presidents met in Madrid yesterday after Economy Minister Luis de Guindos said the nation is pressing on with its analysis of whether to seek a bailout.

“You’ve got a lot of uncertainty at the moment,” said Cameron Peacock, a Melbourne-based market analyst at IG Markets, a provider of trading services for stocks, bonds and currencies. “Will Spain request a bailout? You’ve got U.S. presidential elections in five weeks and you’ve got a fiscal cliff looming at the end of the year,” he said, referring to automatic tax increases and spending cuts that may be triggered if deficit-reduction efforts fail in the U.S.

Nippon Paper

Paper companies fell the most among the Topix’s 33 industry groups today after the Nikkei newspaper reported Nippon Paper’s operating profit will be about 12 billion yen ($153 million) in the first half, compared with the company’s forecast for 15.5 billion yen. The shares lost 2.4 percent to 881 yen. Rival Rengo Co. dropped 5.4 percent to 334 yen.

Uny plunged 11 percent to 541 yen, the lowest since at least 1977, after the retailer forecast 39 billion yen in full-year operating profit. The number compares with the median estimate of 43.5 billion yen in a Bloomberg analyst survey.

Earnings season starts this month with 138 companies on the Topix set to report results on Oct. 26, according to data compiled by Bloomberg.

Daiichi Sankyo declined 5.4 percent to 1,191 yen after halting the trial of a cancer medicine being developed with ArQule Inc. ArQule plunged 56 percent to $2.18 in the U.S. yesterday.

Among stocks that rose, Japan Petroleum Exploration climbed 5.3 percent to 3,380 yen after Kyodo News reported the nation’s second-biggest oil and gas explorer succeeded in trial extraction of shale oil in northern Japan.

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