Nikkei Resumes Slide; Gree Earnings Ahead

Nigel Thomas
11 Aug, 2011
New York City

Stocks in Tokyo declined on the euro-zone worries after French banks plunged more than 10%. The yen firmed and Japanese banks fell to their lowest level in the year with three leading banks trading down 20%. Gree, the social network operator soared on better than expected earnings.

[R]4:30 PM Tokyo – Stocks in Tokyo declined on the euro-zone worries after French banks plunged more than 10%. The yen firmed and Japanese banks fell to their lowest level in the year with three leading banks trading down 20%. Gree, the social network operator soared on better than expected earnings.[/R]

The Nikkei index declined on the worries that French banks may need a financial support and France may suffer a credit rating downgrade. S&P and Fitch issued a statement indicating French debt rating is not expected to be lowered, but investors ignored the statements.

U.S. indexes plunged more than 4% in overnight trading after Fed guided low rates for two years and announced no new measures to lift the economic growth. Investors were also unnerved by the worries that France may have to support its banks and face a downgrade of its credit rating.

The fears of French banks was first manifested in the sharp fall in French bank stocks today with Societe Generale plunging more than 18% and BNP Paribas dropping 10% and Credit Agricole descending 12%.

French President Nicholas Sarkozy urged his ministers to step up the budget cuts measures to preserve the AAA rating and limit the deficit to 5.1% of 2011 GDP. However, U.S. money market funds that invest in French debt refused to roll over $38 billion of debt this week according to a research note from JP Morgan Chase.

The spread of the yield on French bonds rose to 90 points to on the German bunds compared to the average of 34 basis points in all of 2010.

Earlier in the week, Tokyo stocks extended losses for the third day in a row and the benchmark index flirted with the 8,600 lows last seen on March 15.

The yen rose as high as 76.50 from 76.80 in volatile trading and traded against one euro at 110.01 from 110.34 at yesterday’s close.

The Nikkei 225 Stock Average declined 0.6% or 94.26 to 8,981.94 and the broader Topix index fell 0.8% to 770.88.

The Nikkei index had declined 7.4% in the three days of losses before rebounding more than 1% yesterday.

The Nikkei is down 16% from its peak on February 21 and dropped 10% in the year but still above its March 15 low of 8,605.15.

Stock Movers

Financials declined for the third day in a row on the twin worries of the U.S. debt downgrade and the persistent problems in the euro-zone.

Mitsubishi UFJ Financial Group Inc fell 1.3% to 357 yen and Sumitomo Mitsui Financial fell 1.8% to 2,225 yen.

Toyota Motor decreased 2% to 2,850 yen, Honda Motor Co. Ltd fell 3.5% to 2,560 yen and Nissan Motor Co. Ltd declined 3.5% to 709 yen.

Olympus declined 3.6% to 2,221 yen and Canon Inc dropped 1.5% to 3,400 yen.

Energy linked companies fell after oil dropped 0.5% and traded near $81 a barrel. The sharp reversal in oil in the last two weeks knocked off 20% and traded at its low in a year.

Inpex Corp fell 1.6% to 503,000 yen and AOC Holdings Inc declined 2.1% to 459 yen.

Mitsui OSK Lines fell 4.8% to 340 yen. Japan Petroleum Exploration Co. fell 0.6% to 3,325 yen.

Mitusi & Company fell 0.7% to 1,290 yen and Itochu Corp fell 12 yen to 802 yen. Marubeni Corp fell 6 yen to 482 yen.

Tokyo Electric fell 2.5% to 438 yen, Kansai Electric Power Co gained 2.8% to 1,340 yen and Chubu Electric Power Co added 4.8% to 1,421 yen.

Sumitomo Rubber increased 4% to 943 yen after the second largest rubber maker lifted its full year net earnings outlook by 74% to 20 billion yen.

Nikon increased 8.2% to 1,750 yen after it lifted its annual profit outlook 43% to 60 billion yen and lifted its first half dividend to 17 yen per share from 10 yen a year ago period.

Gree Inc soared as much as 5% to 2,140 yen after the social networking site operator reported higher than expected earnings and offered better than expected earnings outlook.

DeNA gained 0.5% to 3,825 yen on the back of better than expected results.