Japan Stocks Fall On U.S. Data As Spain Denies Bailout

By Yoshiaki Nohara - Jun 1, 2012 11:47 AM GMT+0800

Japanese stocks fell, sending the Topix Index toward a nine-week loss, after China’s manufacturing and U.S. economic data missed estimates, adding to concern the world’s two largest economies are slowing.

Sony Corp. (6758), which gets 26 percent of its sales in China and the U.S., dropped 3.1 percent. Hitachi Construction Machinery Co. (6305), a maker of heavy equipment, slid 4.1 percent after mining machinery bellwether Joy Global Inc. cut revenue forecasts. Aozora Bank Ltd. dropped 4.8 percent after saying plans to repay public funds won’t be disclosed at its June shareholder meeting.

The Topix slipped 1.4 percent to 709.74 as of 12:38 p.m. in Tokyo, down 1.7 percent on the week and heading toward a ninth week of decline, the longest such streak since September 1975. The Nikkei 225 Stock Average (NKY) fell 1.1 percent to 8,450.64, with about seven stocks falling for each that rose. The benchmark dropped 10.3 percent in May, the steepest monthly decline since May 2010.

“The global economy, centered in the U.S. and China, is facing stronger headwinds than expected, and recovery expectations are tapering off a bit,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $70 billion. “Japan’s economy doesn’t have the kind of domestic demand that you need to spur growth, so it’s more vulnerable to overseas economies.”

Debt Crisis

The Topix has fallen 19 percent from this year’s high on March 27 as voter opposition to austerity measures in Europe raised concern the debt crisis is worsening, and as China’s growth slowed. The gauge is nearing a 20 percent drop from this year’s peak, which to investors signals the beginning of a bear market. The declines have cut the value of shares on the Topix to 0.84 times book value, the lowest since October 2008.

Stocks fell as China’s purchasing managers’ index expanded at a slower pace for the first time in six months, falling to 50.4 from 53.3 in April, the statistics bureau and logistics federation said in a statement today in Beijing. The weakest reading since December compares with the 52.0 median estimate in a Bloomberg News survey of 27 economists. A reading above 50 indicates expansion.

Companies that do business in China fell. Murata Manufacturing Co., which gets 48 percent of its revenue in China and Taiwan, lost 2.8 percent to 3,955 yen. Trading company Emori & Co. (9963), which depends on China for 41 percent of its sales, dropped 1.3 percent to 913 yen.

U.S. Jobs Data

A U.S. Labor Department report due today is projected to show nonfarm payrolls increased by 150,000 workers in May while the unemployment rate held at 8.1 percent.

Futures on the Standard & Poor’s 500 Index (SPXL1) slid 0.5 percent today. The index fell 0.2 percent in New York yesterday, when data showed the U.S. economy grew more slowly in the first quarter than previously estimated and business activity expanded in May at the slowest pace since September 2009. The number of Americans applying for unemployment benefitsrose.

The U.S. payroll report “is going to be important obviously on the day, but the big issue is how Europe is going to play out,” said Andrew Pease, Sydney-based chief investment strategist for the Asia-Pacific region at Russell Investment Group, which manages about $150 billion. “Spanish bond yields are about 6.5 percent and that tells you something that can’t be ignored. While Spanish yields are that high, you have to have a fairly cautious attitude toward adding risk to your portfolio right now.”

No Spain Bailout

The International Monetary Fund said it’s not preparing financial aid for Spain, and the country denied it’s in talks about a bailout. The nation’s 10-year debt yields were at 6.56 percent, near the 7 percent level that prompted bailouts in Greece, Ireland and Portugal.

Shares of Japanese exporters also fell after the yen touched its highest level against the euro since December 2000. A strong currency erodes the value of overseas revenue when companies repatriate earnings.

Sony, the nation’s largest exporter of consumer electronics, declined 3.1 percent to 1,017 yen, and Honda Motor Co. (7267), Japan’s second-biggest automaker by market value, fell 2 percent to 2,461 yen.

Machinery Makers Fall

Machinery makers fell after Joy Global, the maker of P&H and Joy mining equipment, cut forecasts for full-year earnings and revenue as mining companies ease capital expenditure amid concern over the slowdown in China. Hitachi Construction slid 4.1 percent to 1,450 yen.Komatsu Ltd. (6301), Japan’s largest construction machinery maker, lost 3.6 percent to 1,811 yen.

Aozora Bank, the Japanese lender controlled by Cerberus Capital Management LP, fell 4.8 percent to 158 yen after saying it won’t announce proposals for repayment of public funds at its June shareholders meeting, according to a statement.

Among stocks that rose, Janome Sewing Machine Co. jumped 17 percent to 62 yen. Operating profit is poised to more than double this fiscal year, the Nikkei newspaper reported. Janome gained the most on the 1,674-member Topix.

The Nikkei 225 Volatility Index (VNKY) rose 2.1 percent to 26.77, indicating traders expect a swing of about 7.7 percent on the benchmark gauge over the next 30 days.