Most Japan Stocks Rise as Investors Assess Fed Signal, Await BOJ

  • Fed points to December increase amid moderate U.S. growth
  • Nintendo, Deno shares slump on delay to smartphone game

Most Japanese stocks rose, after the Topix index swung between gains and losses, as investors assessed the Federal Reserve’s signal that is may raise U.S. interest rates in December amid confidence about the outlook for the U.S. economy. Nintendo Co. and DeNA Co. plunged.

Shares of both companies sank at least 9 percent after Nintendo announced a smartphone game the two have been developing will be delayed by at least three months. Drug manufacturers gained as the Wall Street Journal reported Pfizer Inc. and Allergan Plc. are considering a merger, setting the stage for one of the largest deals in the pharmaceutical industry. Lens maker Hoya Corp. surged 6.9 percent after announcing a share buyback. Brokerages tumbled as Nomura Holdings Inc. and Daiwa Securities Group Inc. posted disappointing earnings.

The Topix index closed little changed at 1,547.11 in Tokyo, with five shares rising for every four that fell. The Nikkei 225 Stock Average added 0.2 percent to 18,935.71. The yen advanced 0.3 percent to 120.78 per dollar after weakening Wednesday as Fed policy makers left interest rates unchanged, while giving themselves the option to increase borrowing costs at their next meeting by saying growth in the U.S. remains “moderate.” The Bank of Japan meets Friday to review policy.

“If a December rate hike begins to look more likely, it may be a positive for the U.S., but it could once again put stress on emerging countries,” said Yusuke Kuwayama, a portfolio manager at Tokio Marine & Nichido Fire Insurance Co. in Tokyo. “As Japan has quite a bit of exposure to China and other Asian developing countries, we could see Japanese shares lag” their peers in the U.S.

December Move

Fed officials pivoted toward a December rate increase, betting that further job gains will lead to higher inflation over time. Policy makers also removed a line from September’s statement saying that global economic and financial developments “may restrain economic activity somewhat,” signaling concerns over a China-led slowdown and the impact of last quarter’s market volatility may be abating. Odds the Fed will move on rates at their last meeting of the year rose to 48 percent, from about 32 percent a week ago.

“It was the best statement we could’ve had,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. “The outlook on the economy is good, but the Fed has refrained from raising rates for now.”

U.S. GDP

Economists forecast that data on Thursday in Washington will show U.S. gross domestic product expanded at an annualized pace of 1.6 percent in the third quarter. Investors also are awaiting Friday’s Bank of Japan meeting on monetary policy, with nearly half of analysts surveyed by Bloomberg expecting further easing and a quarter of those predicting the boost to come from more exchange-traded stock fund purchases.

“Today, the market is mostly waiting for the Bank of Japan,” said Kuwayama. “It’ll be hard to make a big move until then.”

Smartphone Game

Nintendo tumbled 9 percent, the most in more than four years, after announcing the release of its first smartphone game has been delayed by at least three months. DeNA, which is Nintendo’s partner for the game, plunged 15 percent, its biggest loss since May 2014.

Nomura and Daiwa, Japan’s biggest brokerages, tumbled after reporting declines in second-quarter profit as recent global market turmoil took a toll on income from trading. Nomura Chief Financial Officer Shigesuke Kashiwagi told analysts in a call on Wednesday that he can’t be positive because client transactions remain muted even though it appears that markets have recovered. Nomura lost 2.9 percent and Daiwa fell 2.7 percent

Hoya jumped 6.9 percent after first-half income and sales beat its forecast and the maker of eyeglass and contact lenses said it would repurchase as much as 3.37 percent of it shares by the end of January.

Drugmakers posted the second-biggest gain among the Topix’s 33 industry groups after the Wall Street Journal reported two of the world’s biggest drug companies, Pfizer and Allergan, are considering merging. Ono Pharmaceutical Co. added 4.4 percent, while Shionogi & Co. advanced 3.1 percent.

Japanese industrial production unexpectedly rose 1 percent in September from a month earlier, data showed Thursday. Economists surveyed by Bloomberg News had forecast a 0.6 percent contraction. The result potentially raises the bar for an expansion to BOJ’s stimulus at Friday’s meeting.

E-mini futures on the Standard & Poor’s 500 Index fell 0.3 percent after the underlying gauge rose 1.2 percent on Wednesday, closing at its highest level since Aug. 18. The index reversed declines following the Fed’s announcement as bank and energy stocks surged.

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