Japan Stocks Fall Second Day as Rout Deepens in Commodity Prices

  • Global equities suffer worst day in a month on oil, iron ore
  • Topix index declines to lowest closing level in a month

Japanese stocks fell for a second day, extending a global equities slump spurred by a rout in commodities. Insurers and drug makers led declines, while consumer lenders gained.

The Topix index dropped 0.8 percent to 1,555.58 at the close in Tokyo, its lowest level in a month. The Nikkei 225 Stock Average tumbled 1 percent to 19,301.07. Global equities suffered their worst day in almost a month on Tuesday as oil lingered at its lowest level since 2009 while iron-ore prices plumbed new lows.

“Poor demand is dragging commodities down across the board. U.S. company earnings, emerging-market economies and their currencies are likely to feel the impact from this,” said Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management Corp. “While lower resource costs are a plus for Japan in the long run, at the moment investors are focusing on the negatives and mirroring overseas moves.”

Steel producer JFE Holdings Inc. dropped 3 percent after a 4 percent slide on Tuesday. Komatsu Ltd. fell, bringing its two-day decline to 3 percent, after the world’s second-largest maker of mining and construction equipment said it faces another tough year ahead as falling commodity prices cool customers’ investment plans.

Normalized to 100 at start of the year
Normalized to 100 at start of the year

U.S. crude traded above $38 a barrel after sliding to as low as $36.64 on Tuesday as OPEC’s decision to effectively abandon a limit on production continued to reverberate through markets. Energy shares rose the most among the Topix’s 33 industry groups as JX Holdings Inc. rebounded from Tuesday’s 3.8 percent loss -- the biggest since Oct. 27 -- to close 1.6 percent higher on Wednesday.

E-mini futures on the Standard & Poor’s 500 Index rose 0.2 percent after the underlying measure lost 0.7 percent on Tuesday, with industrial companies leading declines. Traders are pricing in an 80 percent chance that the Federal Reserve will lift U.S. interest rates from near zero next week.

The slump in raw-material prices comes as Chinese economic growth weakens. A report Wednesday showed continued declines in producer prices after evidence of ongoing weakness in the nation’s trade weighed on global shares Tuesday. China’s consumer prices index rose 1.5 percent in November, accelerating from 1.3 percent a month earlier.

A Bloomberg gauge of industrial metals has tumbled 29 percent this year, raising concern about the profit outlook for the world’s leading resource producers.

Machine Orders

“You’ve got this massive confluence of events conspiring for a negative outcome,” said Tim Schroeders, a portfolio manager who helps oversee about $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Things are feeding on themselves at the moment as China goes through a period of very weak economic data, overhanging concerns about the Fed raising rates in the next week or so and some company specific things which overall are eroding any positive sentiment.”

Japanese machine orders climbed 10.3 percent in October from a year earlier, better than the 0.6 percent gain estimated by economists, a government report showed Wednesday.

Insurance companies led losses among the Topix’s industry groups after Barclays Plc lowered its price target on several insurers. Dai-ichi Life Insurance Co. sank 3.4 percent, while T&D Holdings Inc. fell 2.6 percent.

Mitsubishi Heavy Industries Ltd. dropped 2 percent after the Nikkei reported the company wouldn’t meet a December deadline for delivering a cruise ship to Carnival Corp., likely resulting in losses on the project. The newspaper did not provide attribution for its report.

Mitsubishi UFJ Financial Group Inc. slid 1.2 percent after Daiwa Securities Group Inc. cut its rating on the lender.

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