Nikkei dropped after Fitch warning

Financeroll – Japanese stocks fell, extending last week’s loss, after Fitch Ratings warned it may further cut the credit grades of European nations, diminishing optimism that policy makers will solve the region’s debt crisis.

Sony Corp. (6758), a consumer electronics company that gets 21 percent of its revenue in Europe, dropped 2.9 percent. Japan Material Co., a producer of chip-making equipment, slid on its first trading day. Sumitomo Osaka Cement Co. tumbled 9 percent after the company said it overstated inventory.

The Nikkei 225 Stock Average (NKY) dropped 0.8 percent to 8,331.00 as of the 11:30 a.m. trading break in Tokyo after falling 1.6 percent last week. The broader Topix index lost 0.9 percent to 717.39 with all but three of the 33 industry groups on the gauge sliding. More than two stocks (TPX) fell for each that rose on the Topix.

“Europe’s situation continues to be tough,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “We are likely to see more downgrades for government debt and banks. Stocks will take a hit every time that happens.”

Futures on the Standard & Poor’s 500 Index (SPXL1) fell 0.3 percent today. The index rose 0.3 percent in New York on Dec. 16 even after Fitch Ratings put credit ratings for France, Belgium, Spain, Slovenia, Italy, Ireland and Cyprus under review for a downgrade, saying a “comprehensive” solution to Europe’s crisis is “technically and politically beyond reach.”
Financial Heads Meet

Finance ministers in the euro region will hold a conference call at 3:30 p.m. Brussels time today to meet a self-imposed deadline to channel additional bailout funds and put together new budget rules to stem the debt crisis and buoy investor confidence.

“Time is running out for policy makers to execute what they decided to do,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $120 billion. “It’s not that something big will happen and change the whole market sentiment. It rather depends on the accumulation of small steps.”

Exporters fell with consumer electronics makers contributing the most to the Topix index’s decline. Sony dropped 2.9 percent to 1,320 yen. Panasonic Corp. (6752) fell 5.1 percent to 648 yen. Nintendo Co., a video-game company that gets 34 percent of its sales in Europe, slid 2.9 percent to 10,610 yen.

Europe’s debt crisis, now in its third year, has diminished the earnings outlook for Japan’s exporters. The Topix index has fallen 20 percent this year, compared with a 21 percent drop in the Stoxx Europe 600 Index.
Year in Review

Japanese stocks also have been hurt by the earthquake and resulting nuclear disaster as well as Thailand’s floods, which hurt output at exporters such as Toyota Motor Corp. and Sony.

Tokyo Electric Power Co., the utility at the center of the worst nuclear crisis since Chernobyl, has fallen 88 percent to become the biggest decliner on the Topix index. SxL Corp. a homebuilder that benefited from reconstruction projects after the nation’s biggest earthquake on record, has jumped 260 percent to become the best performer.

Japan Material debuted at 2,525 yen, down from its initial offering price of 2,650 yen. The shares started trading today on the Tokyo Stock Exchange and the Nagoya Stock Exchange.

Other chip-related companies slid. Elpida Memory Inc. (6665), a maker of semidconductors, fell 6.3 percent to 360 yen, and Renesas Electronics Corp. (6723), the world’s largest producer of microcontrollers used in cars, lost 3.1 percent to 474 yen.

Sumitomo Osaka Cement tumbled 9 percent to 213 yen, headed for the biggest drop since September 2009. The company said it is investigating after its inventory was overstated by 1.4 billion yen ($18 million).

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