Nikkei in Japan Declined 1.4%, Rate on Hold

Nigel Thomas
12 Jul, 2011
New York City

Stocks in Japan declined following the worldwide stocks and commodities selloff. Japanese investors are increasingly factoring a bailout of Spain and Italy in the next six months. Banks led the losers as trading and resource companies also dropped. The yen strengthened.

[R]4:00 PM Tokyo – Stocks in Japan declined following the worldwide stocks and commodities selloff. Japanese investors are increasingly factoring a bailout of Spain and Italy in the next six months. Banks led the losers as trading and resource companies also dropped. The yen strengthened.[/R]

Stocks in Japan declined following the weakness in global markets and growing perception that Italy and Spain will be dragged in the widening debt contagion in the euro-zone.

The fragile world market sentiment was unnerved after Italian 10-year bond yield rose to 5.67% and inched closer to 6% that most economists believe the slow growing nation cannot support. Italy is expected to grow at anemic growth rate of 1.3%.

Also the central bank in Japan lowered its estimate of growth.

The Bank of Japan left its key lending rate range between zero and 0.1% in Tokyo today.

The central bank also lowered its assessment of economic growth target to 0.4% for the current fiscal year from 0.6% estimate in April. Despite the pick-up in spending and production, the economy is clawing back slowly after the sharp down turn following March 11 earthquake, said the central bank in its statement.

The Nikkei 225 Stock Average dropped 1.4% to 9,925.92 and the index declined the most this month. The broader Topix index fell 1.5% to 857.19.

The yen rose to 80.06 from 81.50 against one dollar and gained to 111.68 from 114.40 against one euro.

Stock Movers

Banks were among the leading decliners after the widening debt contagion in the euro-zone sparked new worries in the sector.

Sumitomo Mitsui Financial Group Inc decreased 2.1% to 2,466 yen and Mizuho Financial Group Inc fell 1.5% to 131 yen.

Aozora Bank dropped 6.8% to 178 yen after 17 million shares changed hands significantly higher than daily average volume of 3 million shares.

Denso declined 2.6% to 2,900 yen after the auto parts maker estimated operating profit in the current fiscal year to decline 28% to 135 billion yen. The company blamed the rising materials cost and strong yen.

Resources linked stocks declined on the weak commodities prices and a decline in crude oil.

Inpex Corp dropped 4.6% to 584,000 yen and Japan Petroleum Exploration Co. decreased 2.5% to 3,885 yen.

The largest trading house Mitsubishi Corp dropped 1.9% to 2,032 yen and Marubeni declined 1.2% or 7 yen to 556 yen.