Japan Stocks Advance on Draghi’s Pledge to Preserve Euro
Japan shares rose for a second day, with the Nikkei 225 (NKY) Stock Average posting its biggest gain in a month, after European Central Bank President Mario Draghi said policy makers will do whatever it takes to preserve the euro.
Makita Corp. (6586), a maker of power tools that generates 42 percent of sales in Europe, advanced 3.2 percent. Nomura Holdings Inc. (8604), Japan’s largest brokerage, climbed 5 percent after its net income topped estimates. Nippon Steel Corp. (5401) rose 6.7 percent on a Nikkei newspaper report that the company agreed to cut material prices for Toyota Motor Corp.
The Nikkei 225 gained 1.5 percent to 8,566.64 at the close of trading in Tokyo, paring this week’s decline to 1.2 percent as the gauge posted a third week of losses. The broader Topix Index advanced 1.6 percent to 726.44, with more than two shares rising for each that fell.
“There’s pressure on Draghi to act,” Tony Crescenzi, a strategist at Newport Beach, California-based Pacific Investment Management Co., said in a Bloomberg TV interview. “Draghi has created an expectation that must be followed through on.”
The Topix fell 17 percent from this year’s high on March 27 amid concern the U.S. and Chinese economies are slowing and that Europe’s debt crisis will worsen. The decline has left shares on the Topix valued at 0.9 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.4 for the Stoxx Europe 600 Index. A number below one means investors can buy companies for less than the value of their assets.
Stocks linked to Europe rose after Draghi signaled central bank officials are prepared to do whatever is needed to ensure the euro’s survival and act on surging bond yields. His comments came as Spanish policy makers called on the central bank to fight a renewed bout of financial turmoil that pushed the country’s bond yields to euro-area records this week.
Makita gained 3.2 percent to 2,631 yen. Nippon Sheet Glass Co., which gets 41 percent of its revenue in Europe, climbed 2.9 percent to 71 yen.
“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” Draghi said during a speech in London yesterday. “And believe me, it will be enough.”
Stocks in Japan fell this week as the yen rose to an 11- year high against the euro amid concern Greece may exit the currency bloc, hurting the outlook for exporters.
Japan’s consumer prices excluding fresh food fell 0.2 percent in June from a year earlier, the statistics bureau reported today in Tokyo. Bank of Japan board member Takahide Kiuchi this week highlighted uncertainty of whether the central bank can achieve its 1 percent inflation goal, signaling that more monetary stimulus may be needed.
The Nikkei 225 Volatility Index dropped 8.1 percent, paring this week’s 11 percent surge, the biggest weekly jump since May. Trading volume on the Nikkei 225 today was 1 percent below the 100-day average.
Futures on the Standard & Poor’s 500 Index gained 0.4 percent today. The gauge added 1.7 percent in New York yesterday, when U.S. reports on durable goods and jobless claims reduced concern that economic growth is slowing.
The world’s biggest economy is expected to have grown at a slower pace in the second quarter, economists surveyed by Bloomberg estimated ahead of a report today. The Federal Open Market Committee meets next week and Chairman Ben S. Bernanke last week said policy makers are studying options for further easing in case economic growth remains too feeble to produce a lasting decline in unemployment.
Nomura advanced 5 percent to 272 yen, leading gains among brokerages after its quarterly profit beat estimates. The stock rose even as Japanese regulators said they would seek penalties against the securities firm for insider trading. Daiwa Securities Group Inc. rose 4.5 percent to 280 yen.
Steelmakers lead gains among the Topix’s 33 industry groups. Nippon Steel gained 6.7 percent to 160 yen after the company agreed to give Toyota a 2 percent discount on steel sheet for April to September, according to a Nikkei report citing people close to the talks. JFE Holdings, Japan’s No. 2 steelmaker, rose the most since February after saying it will cut costs to counter falling prices. The stock surged 7.1 percent to 1,061 yen.
Among stocks that dropped, Advantest Corp. slumped 9.4 percent to 977 yen, its biggest decline since March 2011. The shares fell after the world’s top maker of memory-chip testers reported first-quarter operating that missed analysts’ estimates, and as its equity rating was cut to sell by CLSA.
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