July 31 (Bloomberg) -- Japan’s Topix index fell for the first time in five days, retreating from a six-month high and paring its monthly gain, as earnings from Nintendo Co. to Denso Corp. disappointed investors at the peak of reporting season.
Nintendo slumped 6.5 percent after the video-game console maker posted a 9.9 billion yen ($96 million) quarterly loss. Denso, an auto-parts manufacturer, slumped 1.8 percent after first-quarter net income missed estimates. Kansai Electric Power Co., a utility serving the Osaka region, sank 2.6 percent after cutting its first-half revenue forecast. Sumitomo Mitsui Financial Group Inc. added 1.7 percent after profit at Japan’s second-biggest bank fell less than estimated.
The Topix reversed gains in the last 30 minutes of trading and fell 0.2 percent to 1,289.42 at the close in Tokyo, dropping from yesterday’s highest level since Jan. 22 and paring this month’s gain to 2.1 percent. The Nikkei 225 Stock Average today slid 0.2 percent today to 15,620.77. The yen held at 102.81 per dollar after falling 0.7 percent yesterday.
“It’s not surprising that there’s concern about the high stock prices considering how swiftly the market rose,” said Masaru Hamasaki, a senior strategist at Tokyo-based Sumitomo Mitsui Asset Management Co., which oversees about 13.4 trillion yen in assets.
The Topix surged 14 percent from this year’s low on April 14 amid optimism about the global economy, signs Japan is weathering a sales-tax increase from that month and speculation the nation’s $1.2 trillion pension fund will buy more local shares. The gauge traded at 1.3 times book value today, compared with 2.7 for the Standard and Poor’s 500 Index and 1.9 for the Stoxx Europe 600 Index yesterday.
Some 318 companies on the Topix report earnings today, the peak of earnings season. Of the businesses that posted earnings since July 1 and for which Bloomberg has estimates, 58 percent beat analysts’ projections for profit, according to data compiled by Bloomberg.
“Earnings are generally moving in the right way,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd. “However, I haven’t seen anything symbolic to really move markets higher. And the problem is how are earnings going to go forward given the currency is hardly moving. I’m concerned exports aren’t increasing.”
Nintendo slumped 6.5 percent to 11,525 yen, the No. 3 drag on the Topix and biggest decline on the Topix Other Products Index, which fell the most among the broader gauge’s 33 industry groups. Sluggish sales of the Wii U console triggered the company’s third loss in the past four quarters as gamers continue their exodus to smartphones.
Denso dropped 1.8 percent to 4,788 yen, its biggest drop since May 19. The company’s quarterly net income fell 20 percent to 68.8 billion yen, missing analyst estimates for 69.2 billion yen in profit.
Kansai Electric lost 2.6 percent to 950 yen after cutting its sales forecast for the first half by 1.2 percent. The power company reported a 29 billion loss in the first quarter, its third-straight quarter of losses.
Sumitomo Mitsui added 1.7 percent to 4,260 yen. First-quarter net income was 230.8 billion yen, beating analyst estimates for a 180 billion-yen gain. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, advanced 0.9 percent to 615.6 yen before posting results today. The two lenders were the biggest boosts to the Topix.
Futures on the S&P 500 fell 0.2 percent. The underlying equity gauge rose less than 0.1 percent in New York yesterday as data showing better-than-forecast economic growth was offset by weaker earnings and the Federal Reserve’s decision to keep trimming asset purchases.
Yesterday’s U.S. Commerce Department report showed gross domestic product expanded at a 4 percent annualized pace in the second quarter, confirming the Fed’s view that a 2.1 percent contraction in the first quarter was transitory. Consumers, whose spending accounts for 70 percent of the economy, have grown more confident as the labor market improves and rising share prices boost wealth.
The yen fell the most since March 19 against the greenback yesterday after the GDP data, sliding 0.7 percent.
U.S. policy makers tapered monthly bond buying to $25 billion in their sixth consecutive $10 billion cut, staying on pace to end the purchase program in October. The Fed said the labor market still has plenty of room for improvement, even after a surprising drop in unemployment, bolstering the case for keeping interest rates low.
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