Nikkei Down 1.2% on Supply Worries and U.S. Debt Downgrade

Nigel Thomas
19 Apr, 2011
New York City

Stocks in Tokyo were dragged lower on the rising uncertainty related to the massive U.S. debt and growing realization that peripheral nations in Europe will need debt restructuring. Yen gained and electronics and chipmakers declined after Texas Instruments cited supply chain problems in Japan.

[R]5:00 PM Tokyo – Stocks in Tokyo were dragged lower on the rising uncertainty related to the massive U.S. debt and growing realization that peripheral nations in Europe will need debt restructuring. Yen gained and electronics and chipmakers declined after Texas Instruments cited supply chain problems in Japan.[/R]

Stocks in Tokyo turned lower in volatile trading after sovereign debt worries resurfaced in Europe and U.S. Supply chain problems originating in Japan lowered chip makers after Texas Instruments said it is struggling with parts shortages and production problems in Japan.

The Nikkei 225 Stock Average declined 1.2% or 115.62 to 9.441.03 and the broader Topix index fell 1.1% to 825.56.

The Nikkei benchmark index at one declined 150 points or 1.5% and managed to recover after investors focused on earnings next week. Trading volume declined to 1.9 billion shares or 1.16 trillion yen.

The yen advanced and traded at 83.01 to a dollar.

In overnight trading indexes in New York were down and market watchers were surprised at the market’s reaction to S&P comments on the U.S. debt. The rating agency is widely perceived as a laggard in adjusting its views on the U.S. debt and its views are considered a suspect because of its close proximity to the U.S. government.

U.S. indexes at one point dropped as much as 1.6% before recovering to close down 1.1% after S&P lowered the credit outlook on the U.S. government debt and indicated that there is one-in-three chance that the rating will be lowered in the next two years.

Standard & Poor’s and other rating agencies have been slow in adjusting their outlooks of the U.S. debt and are widely perceived in the analysts community to have lost their credibility in providing unbiased ratings.

The U.S government debt has ballooned in the last ten years on three wars and bailout of banks and low taxes on highest income earners and top three rating agencies never questioned the rise in debt levels over a decade.

The rating agency in the past have kept their highest rating on mortgage securities that turned out to be worthless after the U.S. housing market collapsed in 2008.

Stock Movers

Chipmakers declined after comments from the Texas Instruments. Renesas Electronics dropped 5.4% to 678 yen and Advantest declined 3.2% to 1,405 yen.

Shinko Shoji Co Ltd declined 2.8% to 660 yen and Kyoden Company Ltd dropped 4.4% to 131 yen.

TDK Corp fell 7.6% to 3,980 yen on the speculation that if Samsung Electronics sells its HDD operation to Seagate Technology. Samsung sources HDD heads exclusively from TDK.

Ahead of earnings next week, Honda Motor Co Ltd declined 33 yen to 2,948 yen and Canon Inc dropped 65 yen or 1.8% to 3,555 yen.

Toyota Motor Corp declined 0.5% to 77.25 yen and Nissan Motor declined 1.4% to 17.21 yen.