Japan Stocks Rise, Following U.S. Equities Higher After GDP Data

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Japanese stocks rose, following a gain in U.S. equities, as a report showed Japan’s economy contracted last quarter by less than economists forecast.

Shionogi & Co. climbed 3.1 percent after Mizuho Financial Group Inc. raised its share-price target on the drugmaker. Digital Garage Inc. jumped 6.1 percent after the web service provider’s operating profit beat analyst estimates. Sompo Japan Nipponkoa Holdings Inc. added 1.5 percent after a report the insurer will raise premiums for the first time in eight years. Oil explorer Inpex Corp. slid 0.7 percent following a decline in crude prices.

The Topix index added 0.5 percent to 1,672.87 at the close in Tokyo, with more than twice the number of shares rising as falling. Volume was 27 percent below the 30-day average. The Nikkei 225 Stock Average gained 0.5 percent to 20,620.26.

“The GDP data isn’t bad,” said Andrew Clarke, director of trading at Hong Kong brokerage Mirabaud Asia Ltd. “It’s a small step in the right direction.”

A government report Monday showed Japan’s economy shrank an annualized 1.6 percent in the three months through June, snapping two quarters of expansion. Analysts forecast a 1.8 percent contraction after the economy grew a revised 4.5 percent in the first quarter.

The contraction came as consumers and businesses cut spending, putting pressure on the prime minister to return his focus to Abenomics. Since coming to power in December 2012, Shinzo Abe has delivered unprecedented monetary easing and fiscal stimulus that helped push the Topix stock index to an eight-year high this month, but failed to translate into a broader economic recovery.

Big Worry

“Private consumption turning negative shows that ordinary people are worried and that’s a big worry coming as Prime Minister Abe’s popularity continues to wane,” said Andrew Sullivan, head of sales trading at Haitong International Securities Group Ltd. in Hong Kong. “Business spending also slowed significantly, and that is in the face of cheaper energy costs.”

Futures on the Standard & Poor’s 500 Index were little changed after the underlying U.S. measure rose 0.4 percent on Friday in New York.

Energy-related shares led declines on the Topix. OPEC could potentially boost crude oil production to 33 million barrels a day, the most ever, after international sanctions are removed against Iran amid a global supply glut, according to the country’s OPEC representative.

Oil Glut

The global oil market is already in surplus by about 3 million barrels a day, with Saudi Arabia and Iraq responsible for OPEC’s oversupply in the past six months, Iran’s state-run Islamic Republic News Agency reported Sunday, citing Mehdi Asali. Iran can boost output by 500,000 barrels a day within one week after sanctions are lifted, Oil Minister Bijan Namdar Zanganeh said earlier this month.

Brent oil was down Monday, losing 1.1 percent to $48.63.

Inpex lost 0.7 percent, while offshore contractor Japan Drilling Co. lost 1.4 percent. Japan Petroleum Exploration Co. slipped 1.2 percent.

Investors were also watching the yuan after the People’s Bank of China raised the currency’s reference rate Friday following three straight daily devaluations earlier in the week that roiled global markets. It kept its currency steady on Monday.

Yuan Calm

“The situation surrounding the yuan has passed its peak and there’s a sense of calm,” said Hirotsugu Nagata, a member of the investment information department at Mizuho Securities Co. “The market’s attention now returns to the U.S. rate increase.”

Shionogi gained 3.1 percent to 5,270 yen after Mizuho raised its target price on the stock by about 40 percent to 6,500 yen.

Digital Garage jumped 6.1 percent, the most since November, after posting an 84 percent gain in operating profit to 4.18 billion yen, beating analyst estimates for 4.58 billion yen.

Sompo Japan gained 1.5 percent after the Nikkei newspaper reported the insurer will raise premiums to companies for the first time in eight years.

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