Japanese Shares Rebound From Biggest Drop Since August

Japanese shares jumped, following yesterday’s biggest fall in the Topix index since August, after the yen snapped a three-day rally and U.S. data showed retail sales climbed more than forecast.

Panasonic Corp., which gets almost half its revenue outside Japan, added 3.7 percent. NTN Corp., a maker of bearings, surged 7.9 percent after Bank of America Corp.’s Merrill Lynch unit said earnings will probably be ahead of the company’s target. Insurers advanced the most among the 33 Topix subgroups after dropping the most in six weeks yesterday. Camera maker Nikon Corp. fell 1.2 percent after its rating was cut to underperform by Credit Suisse Group AG.

The Topix climbed 2 percent to 1,294.52 at the close in Tokyo, with all industry groups rising. The gauge yesterday fell 2.3 percent, the largest decrease since Aug. 7. The Nikkei 225 Stock Average added 2.5 percent today to 15,808.73. The yen slid 0.2 percent to 104.42 per dollar after retreating 1.2 percent yesterday following three days of gains.

“The yen is having a big effect today,” said Masaru Hamasaki, a senior strategist at Tokyo-based Sumitomo Mitsui Asset Management Co., which oversees about 11 trillion yen ($105 billion) in assets. “Stocks were sold after the U.S. jobs data, but retail sales helped to calm nerves. Shares fell a bit too much for one day yesterday, so they look more affordable now and investors are repurchasing.”

Futures on the Standard & Poor’s 500 Index were little changed today. The measure added 1.1 percent yesterday, its biggest jump since Dec. 18, as better-than-forecast retail sales and corporate merger activity signaled confidence in the economy.

Retail Sales

U.S. retail sales rose 0.2 percent last month as consumers bought holiday gifts, beating the 0.1 percent increase projected by economists surveyed by Bloomberg. A Jan. 10 report showed the weakest U.S. payrolls growth since January 2011.

Philadelphia Fed President Charles Plosser said yesterday he would prefer to end the central bank’s quantitative easing before late 2014. Dallas Fed President Richard Fisher said he would aim to eliminate the program entirely “at the earliest practicable date.”

Fed policy makers said Dec. 18 they will cut monthly bond buying to $75 billion from $85 billion, citing improvements in the labor market. The next Federal Open Market Committee meeting is on Jan. 28-29.

Exporters Climb

Panasonic jumped 3.7 percent to 1,368 yen, its highest close since April 2010. Sharp Corp., which gets almost 60 percent of sales outside Japan, added 2.4 percent to 342 yen.

Hitachi Ltd., whose products range from nuclear-power systems to kitchen appliances, gained 4.1 percent to 867 yen, its highest level since July 2007, after Nomura Holdings Inc. said the company may report record third-quarter profit. Hitachi is due to report earnings on Feb. 4.

NTN gained 7.9 percent to 522 yen, its highest close since October 2008. Jtekt Corp., another bearings maker, added 5.9 percent to 1,749 yen, while NSK Ltd. advanced 6.2 percent to 1,338 yen. The companies’ operating profits may beat forecasts due to the yen being weaker than their assumptions, according to Bank of America analyst Hideyuki Mizuno, who also boosted the target price of all three companies.

Earnings season continues in Japan and will peak in the first week of February, according to data compiled by Bloomberg.

“Investors were risk averse yesterday after the sluggish U.S. jobs data, but today the uncertainty has receded as retail sales came in above expectations,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-biggest lender. “Some technical indicators are showing that Japanese shares are in a buying zone.”

World Bank

Stochastics, which study the velocity of price movements, suggest the Nikkei 225 may have fallen too quickly, with the K-line dropping to 23.5 yesterday, below the threshold of 30 that some traders see as signaling the market is oversold. The Nikkei 225 dropped 3.1 percent yesterday.

Stocks also gained after the World Bank raised its global economic growth forecast. The Washington-based lender sees the world economy expanding 3.2 percent this year, compared with a June projection of 3 percent and up from 2.4 percent in 2013.

Among shares that fell, Nikon slipped 1.2 percent to 1,886 yen. The company was cut to underperform from neutral by Credit Suisse, which also lowered its target price to 1,700 yen from 1,900 yen.

The Topix jumped 51 percent in 2013, its third-biggest yearly gain on record, as Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda took steps to end 15 years of deflation. Strategists surveyed by Bloomberg expect the gauge will climb to 1,470 by the end of 2014, as the yen weakens amid prospects for further stimulus by the BOJ while the Federal Reserve cuts back.

Volume on the Japanese gauge was in line with its 100-day average today. The measure traded at 1.31 times book value, compared with 2.67 for the S&P 500 and 1.84 for the Stoxx Europe 600 Index yesterday.

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