Nikkei Drops 2.2% and Extends Losses for 2nd Day

Nigel Thomas
08 Aug, 2011
New York City

Stocks in Japan fell for the second day after the U.S. debt was downgraded for the first time and Europe faces a rising bill to defend bonds of Spain and Italy. Trading companies declined after oil and base metal fell. Honda edged lower after it announced worldwide recall of 2 million vehicles.

[R]4:30 PM Tokyo – Stocks in Japan plunged for the second day after the U.S. debt was downgraded for the first time in seventy years and Europe faces a rising bill to defend sovereign bonds of Spain and Italy. Trading companies declined after oil and base metal fell. Honda edged lower after it announced worldwide recall of 2 million cars.[/R]

Tokyo stocks extended losses for the second day in a row and the benchmark index flirted with 9,000 for the first time since the March decline.

Indexes in Japan and Asia declined after late Friday Standard & Poor’s cut rating on the U.S. debt from its highest AAA rating to AA+. The other two agencies left the rating unchanged on August 2 after the U.S. lawmakers struck a debt and spending agreement.

S&P left its view on the short term debt unchanged and lowered only the long term debt rating and cited that the U.S. needs at least $4 trillion in spending cuts or revenue increase to meet lower its $14 trillion in debt.

The Nikkei index extended its losses by 2.2% after losing 5.4% last week and the benchmark index is down 11% in the year.

The yen rose as high as 78.43 from 79.41 in volatile trading and traded against one euro at 110.71 from 113.29 at yesterday’s close.

The Nikkei 225 Stock Average plunged 2.2% to 9,097.56 and the broader Topix index fell 2.3% to 782.86. The Nikkei is down 17% from its peak on February 21 and dropped 11% in the year but still above its March 15 low of 8,605.15. i

Trading volume declined to 2 billion stocks above the last week average of 1.95 billion shares and 1,521 stocks closed lower and 108 declined.

Stock Movers

Financials and brokers were among the hardest hits in trading today on the worries that the rising prospects of sovereign debt in the euro-zone may generate losses.

Mitsubishi UFJ Financial Group Inc dropped 2.6% or 10 yen to 372 yen and Sumitomo Mitsui Financial decreased 53 yen. Mizuho Financial Group fell 2 yen to 119 yen.

Ebara Corp dropped 18% to 362 yen after it June quarter profit plunged 58% on Friday.

Olympus declined 5% to 2,414 yen after it swung to net loss of 2.15 billion yen in the June quarter compared to 1.5 billion profit in the quarter a year ago.

Honda Motor Co declined 3% to 2,798 yen after it plans a worldwide recall of 2 million cars and SUVs.

Kirin Holdings declined 3.4% to 992 yen after it lowered its annual earnings outlook and blamed it on the weakness after the March earthquake.

Energy linked companies were generally lower on the prospect of lower economic growth worldwide as the U.S. and Europe struggles with debt stress.

Inpex Corp fell 1.3% or 7,000 yen or 526,000 yen and Cosmo Oil declined 2.3% or 5 yen to 212 yen.

Mitusi & Company fell 2.7% to 1,313 yen and Itochu Corp dropped 27 yen to 827 yen. Marubeni Corp fell 22 yen to 507 yen.