Japan Shares Fall as Commodity Slump Heightens Economic Concern

Updated on

Japanese stocks fell as a slump in commodities heightened concern over slowing global economic growth amid weak U.S. earnings. Shares extended declines after a Chinese factory gauge dropped to a 15-month low.

Energy-related shares slipped after crude oil entered a bear market, with JGC Corp. falling 2.4 percent. Machinery maker Komatsu Ltd. slid 1.6 percent after U.S. rival Caterpillar Inc. cut its sales forecast. Insurers declined after privately held Meiji Yasuda Life Insurance Co. agreed to buy Oregon-based StanCorp Financial Group Inc. for a 49.9 percent premium. TV Tokyo Holdings Corp. jumped 3.7 percent after its largest shareholder Nikkei Inc. agreed to buy the Financial Times.

The Topix index declined 0.5 percent to 1,655.86 at the close in Tokyo, capping a a 0.4 percent loss this week. The Nikkei 225 Stock Average dropped 0.7 percent to 20,544.53, tracking losses in U.S. shares, which were dragged lower by slumping energy prices and poor earnings results.

Some of the decline in the price of oil “is attributable to advances in the negotiations with Iran, but in the background there’s also the worry over a global economic slowdown led by China,” said Yutaka Miura, a technical analyst at Mizuho Securities Co. in Tokyo. “Cheaper oil and U.S. earnings, which were hit by the stronger dollar, will be negative factors.”

Oil relapsed into a bear market as resilient U.S. output, rising OPEC supply and threats to Chinese demand deepen a global supply glut. After its nuclear accord with world powers, Iran will focus on regaining the share of the oil market market it lost due to economic sanctions, regardless of the impact on prices, a government official said on Monday.

Energy shares fell, with oil-servicing firm JGC dropping 2.4 percent to close at a three-year low. Chiyoda Corp. slumped 2.3 percent.

Chinese Manufacturing

Shares extended declines after a private gauge of Chinese manufacturing unexpectedly fell in July to the lowest reading in 15 months, heightening concern about the extent of the slowdown in the world’s second-largest economy. The preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics was at 48.2 for July, below estimates for 49.7. Readings below 50 indicate contraction.

“The numbers coming out of China are bad,” said Masanori Ikunaga, a Tokyo-based fund manager at Sumitomo Mitsui Asset Management Co. “The market is watching if inventory adjustments make some progress and bottom out in the July to September period and thereafter begin helping the economy, or if there’s a more lasting effect.”

S&P Futures

Futures on the Standard & Poor’s 500 Index were little changed after the underlying U.S. measure lost 0.6 percent Thursday. Shares fell amid disappointing earnings from Caterpillar Inc. to 3M Co., while copper’s slide to a two-week low hit mining shares. Sluggish international markets and a stronger dollar are damping earnings at U.S. industrial companies.

Caterpillar’s earnings and reduced sales forecast, as well as the weak Chinese data, weighed on Japanese industrial firms. Komatsu, which relies on China for 23 percent of sales, dropped 1.6 percent, while Hitachi Construction Machinery Co. lost 1.5 percent.

Insurance companies declined on concerns Meiji Yasuda’s $5 billion deal to buy StanCorp for a 49.9 percent premium would make future acquisitions more expensive. MS&AD Insurance Group Holdings Inc. lost 1.6 percent, while Tokio Marine Holdings Inc., which last month agreed to pay a 37.6 percent premium for HCC Insurance Holdings Inc., slumped 2.1 percent.

TV Tokyo jumped 3.7 percent on speculation Nikkei’s agreement to buy the FT Group would lead to new business for the broadcaster. Nikkei holds 31.45 percent of TV Tokyo’s shares, making it the largest shareholder, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE