Japanese Shares Rise as Steel, Telecoms Stocks Lead Gains

Japan shares rose, with the Topix index climbing for the sixth time in seven days, as steel and telecommunications stocks led gains among the gauge’s 33 groups.

Nippon Steel & Sumitomo Metal Corp., the world’s largest steelmaker by value, climbed 3.3 percent after the Nikkei newspaper reported Toyota Motor Corp. agreed to a 10 percent price increase. Sumitomo Metal Mining Co., which counts gold as a primary product, jumped 4.3 percent after bullion prices yesterday gained the most in more than a year. Tokyo Electric Power Co. led losses on the Nikkei 225 Stock Average after confirming groundwater laced with radiation from its crippled Fukushima nuclear plant has been leaking into the ocean.

The Topix added 0.5 percent to 1,222.72 at the close of trading in Tokyo, after falling as much as 0.6 percent. Volume was 21 percent below the 30-day average. The Nikkei 225 climbed 0.8 percent to 14,778.51. Stocks swung yesterday before closing 0.4 percent higher after Prime Minister Shinzo Abe’s ruling coalition won upper-house polls on July 21.

“Now that the elections are over, there aren’t many new incentives to buy stocks, but at the same time we’ve seen a lot of profit-taking so there’s no reason to sell either,” said Takashi Miyazaki, a senior strategist who helps oversee about $70 billion at Mitsubishi UFJ Asset Management Co. in Tokyo. “There’s no cause for concern about Japan’s economic growth for this quarter, and both the economy and earnings are likely to fare better.”

Economic Assessment

After plunging as much as 18 percent from a May 22 high, the Topix rebounded amid optimism Prime Minister Shinzo Abe will push through reforms following the polls. The election victory gives Abe’s ruling coalition a majority in both houses of parliament, enabling faster policy making as it seeks to deliver on promises for structural reforms.

Japan’s Cabinet Office today raised its overall assessment of the economy for a third straight month, saying the country is showing signs of a self-sustaining recovery. Last month, the government also upgraded its view on housing construction, public investment, exports, industrial production, corporate profits and employment.

Iron and steel producers rose the most among the gauge’s industry groups today. Nippon Steel & Sumitomo Metal and Toyota agreed to raise prices for steel sheets by 10,000 yen a ton, or about 10 percent, amid a weakening yen, the Nikkei newspaper reported, without citing anyone. This price increase will serve as a benchmark for Japanese material makers and their clients such as carmakers, electric machinery companies and shipbuilders, the Nikkei said.

Nippon Steel & Sumitomo Metal gained 3.3 percent to 309 yen, its highest level since Feb. 2011. JFE Holdings Inc., Japan’s No. 2 steelmaker, increased 3.4 percent to 2,621 yen. Kobe Steel Ltd. climbed 2 percent to 155 yen.

Earnings Season

“Steel shares are rising as the price increase was a lot bigger than envisaged, so expectations are growing for the sector,” said Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co., which oversees about $33 billion. “We’re also waiting for earnings season to really kick off. We are optimistic about earnings for domestic shares.”

Next week is the peak of first-quarter earnings reporting for companies on the Topix, with 688 of them scheduled to announce results. Earnings per share will surge 91 percent from the previous quarter, according to analyst estimates compiled by Bloomberg. Full-year profits are projected to rise 57 percent, the data show.

Sumitomo Metal Mining added 4.3 percent to 1,310 yen, the fourth-biggest gain on the Nikkei 225, after spot gold climbed 3.1 percent yesterday, the most since June 20. Mitsubishi Materials Corp., which also processes bullion, increased 2.8 percent to 368 yen. Miner and smelter Dowa Holdings Co. gained 1.7 percent to 971 yen.

Tepco Sinks

Among shares that fell, Tokyo Electric Power, which has surged 218 percent this year, dropped 6.7 percent to 656 yen, the most on the Nikkei 225.

Backtracking on previous comments, the utility also known as Tepco confirmed the groundwater leaks last night, raising concern toxic water has been flowing into the sea since the disaster at the facility more than two years ago. Japan’s Chief Cabinet Secretary Yoshihide Suga urged the company to fix the problem, which he said was “serious.”

The Topix added 15 percent over the past five weeks, the biggest such advance since April 2009. The 25-day Toraku Index, which compares the numbers of advancing and declining stocks on the Topix, reached 133.49 yesterday, above the 130 level some investors say signals stocks may decline.

“Japanese stocks are likely to continue see-sawing,” said Toshihiko Matsuno, a strategist at Tokyo-based SMBC Friend Securities Co., a unit of Japan’s second-biggest lender by market value. “As the market had priced in the election results, there’s now a feeling Japanese shares are overheating on a technical level.”

Futures Climb

Futures on the Standard & Poor’s 500 Index climbed 0.2 percent today after the gauge rose 0.2 percent to a record in New York yesterday. A decline in U.S. home sales eased concern the Federal Reserve will start reducing stimulus within two months. Sales of previously owned U.S. homes dropped 1.2 percent in June, data yesterday showed.

The Topix traded at 1.31 times book value today, compared with 2.49 for the S&P 500 and 1.69 for the Stoxx Europe 600 Index. The gauge’s 30-day historic volatility was at 25.68 today, down 41 percent from its July 2 high of 43.22.

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