Japan Stocks Fall First Time in Seven Days as China Disappoints

  • Fast Retailing drags down Nikkei 225 ahead of earnings report
  • Japanese machine orders unexpectedly decline in August

Japanese stocks fell for the first time in seven days as an unexpected drop in machine orders and smaller-than-expected gains in Chinese equities after a week-long holiday weighed on sentiment.

Fast Retailing Co. was the biggest drag on the Nikkei 225 Stock Average, declining 2.3 percent before publishing profit forecasts after the market close that missed estimates. Other retailers also fell, including Aeon Co., which sank 7.2 percent after maintaining its full-year forecasts even as first-half operating profit grew more than estimated. Paper product makers were the biggest gainers among the Topix index’s 33 industry groups after the Nikkei newspaper reported Hokuetsu Kishu Paper Co.’s first-half operating profit will be about 4 billion yen ($33 million), sending shares 3 percent higher.

The Topix index dropped 0.8 percent to 1,481.40 at the close in Tokyo, with more than two stocks falling for each that rose. The Nikkei 225 sank 1 percent to 18,141.17. The yen added 0.2 percent to 119.82 per dollar, strengthening for a third day.

Machine orders “have been weak for three straight months, and this may have been one reason for the selling,” said Hiroaki Hiwada, a Tokyo-based strategist at Toyo Securities Co. “Some may be holding off on buying until after the options expiry tomorrow.” October futures and options on the Nikkei 225 expire Friday.

Machine Orders

Japanese machine orders fell 3.5 percent in August from a year earlier, worse than the 3.5 percent gain estimated by economists, a government report showed Thursday. On a month-on-month basis, orders shrank 5.7 percent, below estimates for a gain of 2.3 percent.

Hino Motors Ltd. tumbled 4.2 percent after Credit Suisse Group AG cut its rating on the truckmaker. Murata Manufacturing Co., a supplier to Apple Inc. and Samsung Electronics Co., lost 1.5 percent after its chief executive officer told Reuters he expects the smartphone market to slow on weaker Chinese demand.

The Shanghai Composite Index, trading for the first time since Sept. 30, rose 3.2 percent, less than the 11 percent gain in Chinese shares listed in Hong Kong over the week-long mainland holiday. The Hang Seng China Enterprises Index lost 1.6 percent Thursday.

Global Rebound

Global stocks are recovering from their worst quarter since 2011 as bets the Federal Reserve will keep U.S. interest rates near zero spurs demand for assets that benefit when borrowing is cheap. The MSCI All-Country World Index jumped 1 percent Wednesday for a sixth day of gains, its longest advance since April.

“There might be some reactionary selling after recent gains, and the Nikkei 225 might fall below 18,000, but we’re still in a more risk-on state rather than a risk-off state, so I expect equities to remain stable,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo.

E-mini futures on the Standard & Poor’s 500 Index declined 0.7 percent after the underlying gauge climbed 0.8 percent in New York on Wednesday as biotechnology shares rebounded and weakness in the dollar spurred gains among commodities producers. The measure is still 4.2 percent below a level reached on Aug. 11, the day China’s surprise currency devaluation sent the index careening into a correction.

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