Fifth Monthly Production Increase in Japan; Promise Surged 18%

Nigel Thomas
30 Sep, 2011
New York City

Stocks in Japan were flat and investors turned cautious after weak global sentiment. Industrial production increased for the fifth month in a row and labor force declined to the 1987 level. Furukawa, Fujikura and Sumitomo Electric plunged on price fixing charges worries. Promise soared 18%.

[R]6:00 PM Tokyo – Stocks in Japan were flat and investors turned cautious after weak global sentiment. Industrial production increased for the fifth month in a row and labor force declined to the 1987 level. Furukawa, Fujikura and Sumitomo Electric plunged on price fixing charges worries. Promise soared 18%.[/R]

Stocks in Japan traded flat following a regional sell-off in Asia after China reported third monthly weakness in manufacturing. The global backdrop was also weak and sentiment weakened dragging the dollar lower.

Japan’s labor force declined to the smallest level since October 1987 according to the latest data released by the statistics bureau.

The number of people in the labor force dropped to 59.4 million in August after employers eliminated 160,000 and 200,000 people either stopped looking for work or retired.

Japan’s industrial production rose 0.8% in August, its fifth monthly increase in a row and prompted trade ministry to note that production has “almost recovered” since the March disaster.

The index of industrial shipment increased 0.3% and the index of industrial inventories rose 2.1%. According to the Trade Ministry the industrial production index is expected to decline 2.5% in September and recover 3.8% in October.

However the news from the rest of Asia was weaker than expected. South Korea’s production increased 4.8% in August, less than expected and China’s manufacturing shrank for the third month in a row.

China''s purchasing managers'' index was 49.9 in September, unchanged on August, but higher than the flash estimate of 49.4, final results from Markit Economics showed today.

The market enthusiasm did not last and before the opening German lawmakers overwhelmingly passed the proposal to expand the European bailout fund. The European markets were reassured after the level of support Chancellor Angela Merkel and her party received from the opposition members.

At least in trading yesterday, the solid vote in the favor of European rescue fund expansion supported European indexes and the market opening in New York but a chorus growing minority of investors are still factoring the eventual Greek default that may happen as early as June 2012.

The German vote will allow the nation to increase its participation in the European Financial Stability Facility to €211 billion from €123 billion and expand the rescue fund to provide emergency loans to troubled nations.

German people have been against the setting up of such a facility and expanding and several investors are also worried that no amount of loans to the Southern European nations will solve the expanding sovereign default crisis.

A survey released by Bloomberg news indicated at least 55% of institutional investors are factoring Greek default or at least one nation leaving the euro zone in the next one year.

The Nikkei 225 Stock Average decreased 0.94 to 8,700.29 and the broader Topix index added 0.7% to 754.07.

For the week the Nikkei added 1.6% and for the month fell 2.8%. The index had the worst fall in the quarter since June 2010 and dropped 11.4%.

The yen edged lower to 76.16 from 76.35 against one dollar and fetched 104 yen against one euro.

Stock Movers

Furukawa Electric declined 5.3% to 213 yen after the company entered into a plea bargain with the U.S. Department of Justice to pay a fine of $200 million for participating in international price cartel for electric harnesses.
Sumitomo Electric dropped 8% to 917 yen and Fujikura Ltd declined 6.2% to 257 yen.

Japan Tobacco Inc increased 0.6% to 363,500 yen and gained earlier as much as 3% on the speculation that the government may sell its stake in the company to pay for nuclear disaster costs.

Japan Petroleum Exploration Co increased 2 yen to 2,845 yen and Inpex added 0.8% to 484,000. Stocks increased for the second day after the ruling Democratic Party of Japan leader Seiji Maehara called for stake sales that several government officials said contradicted long term trade policy.

Promise Co, Ltd surged its daily limit to 18% to 659 yen and after the close Sumitomo Financial agreed to pay 780 per share and participate in the share offering that valued the sub-prime lender at $2.7 billion.

The Tokyo Electric Power Company rose 3% to 240 yen.

Dai-ichi Life fell 0.4% to 81,200 yen on the hopes that European policymakers will be able to contain the Greek crisis spreading to other smaller nations. The insurance company has exposure to Spain and Greece’s bonds worth $4.2 billion.

Toyota Motor decreased 0.5% to 2,688 yen and Honda Motor Co. fell 33 yen to 2,299 yen and Nissan Motor increased 3 yen to 693 yen.

Sony Corp fell 0.5% to 1,507 yen, Panasonic Corp declined 9 yen to 754 yen and Canon Inc closed down 10 yen to 3,550 yen. Sharp Corp increased 16 yen to 656 yen.

Olympus Corp fell 31 yen to 2,417 yen. Fanuc Ltd declined 30 yen to 10,830 yen. Kyocera increased 0.5% to 6,540 yen.

Nippon Yusen KK closed up at 211 yen and Mitsui OSK Lines, Ltd closed unchanged at 311 yen.

Mitsubishi UFJ Financial Group fell 1 yen to 354 yen and Sumitomo Mitsui Financial Group decreased 0.6% to 2,206 yen.

Mitsubishi Corp increased 2 yen to 1,592 yen and Mitsui & Co fell 22 yen to 1,134 yen.

Komatsu increased 17 yen to 1,699 yen and Hitachi Construction Machinery Co increased 26 yen to 1,312 yen.