Nikkei Falls 10.3% in May, Japanese Bonds at 9-Year Low

Nigel Thomas
31 May, 2012
New York City

Stocks in Tokyo closed down and finished May with a loss of 10.3%, the worst monthly decline in the last two years. The yen gained and bond yields dropped after euro zone stress drove investors to the safety of few select governments bonds. Nuclear utilities operators rose on the prospect of restart

[R]8:00 PM Tokyo – Stocks in Tokyo closed down and finished May with a loss of 10.3%, the worst monthly decline in the last two years. The yen gained and bond yields dropped after euro zone stress drove investors to the safety of few select governments bonds. Nuclear utilities operators rose on the prospect of restart of power plants.[/R]

May was tough month for investors in Japan as losses mounted and financial stress in the euro zone drove bond yields to record low and the yen near highs.

For the month of May, the Nikkei index dropped 10.3%, the worst decline in two-years after fall of 11.7% in May 2010.

The economy is recovering at a steady pace in Japan and domestic company earnings have rebounded at a faster than anticipated pace but the strong yen and the persistent worries linked to exports to the euro zone overwhelmed market sentiment.

The stress in financial markets around the world was visible as global markets completed the worst monthly decline in three years. Euro zone stress is increasingly dragging economies of China and India into a slower growth mode and driving the commodities prices lower.

Today India reported GDP growth in the quarter to March fell to 5.3%, the eighth quarterly growth decline in a row and for the fiscal year the economic growth dropped to 6.5%.

The stress in bond markets was palpable after Switzerland sold bonds at a negative interest rate of 0.62% on Tuesday and the U.S. Treasury yields dropped near record low on Wednesday. German and Japanese bond yields also declined to near lows as investors sought the safety of principal.

The Japanese government 10-year bond yield fell to a 9-year low of 0.81%.

The currency markets are also roiled as the euro falls to a 2-year low against the dollar and the yen and the dollar strengthened after a European Union report painted a weak economic outlook for the region including Germany.

The Nikkei 225 Stock Average dropped 90.46 or 1% to 8,542.73 and the broader Topix index decreased 4.13 to 719.49. For the year, the Nikkei declined temporarily in the negative territory today but recovered at the end to close up 1% for the year.

In trading, stock turnover jumped to 10-week high with 2.3 billion shares changing hands, higher than 1.62 billion shares in yesterday’s trading.

Stock Movers

Renesas Electronics shrank 3.8% or 10 yen to 250 yen after rising more than 25% in yesterday’s trading.

Nuclear power utilities were in focus after Prime Minister Yoshihiko Noda said on Wednesday that idle nuclear reactors that are deemed safe may have to be restarted to avoid summer power shortages.

Kansai Electric Power Company, Inc gained 35 yen to 1,134 yen and Tokyo Electric Power increased 4 yen to 158 yen.

Chubu Electric Power soared more than 6%, Shikoku Electric Power Co and Hokkaido Electric Power gained more than 3%.

Toyota Motor dropped 35 yen to 3,040 yen and Honda Motor Co. declined 62 yen to 2,512 yen and Nissan Motor Co Ltd decreased 9 yen to 758 yen.

Sony Corp fell 2 yen to close at 1,050 yen, Panasonic Corp closed down at 4 yen to 520 yen and Canon Inc declined 115 yen to 3,150 yen. Toshiba fell 2 yen to 295 yen.

Olympus Corp advanced 43 yen to 1,257 yen, Nikon increased 24 yen to 2,184 yen and Fanuc Ltd slumped 190 yen to 13,520 yen. Hitachi Ltd slides 3 yen to 449 yen.

Komatsu Ltd declined 51 yen to 1,878 yen, Hitachi Construction Machinery Co shrank 31 yen to 1,512 yen.

Inpex Corp slides 2.8% to 453,000 yen and Japan Petroleum Exploration Co. gained 20 yen to 3,035 yen.

Mitsui O.S.K. Lines, Ltd fell 3 yen to 277 yen; Kawasaki Kisen Kaisha, Ltd closed unchanged to 145 yen and Nippon Yusen K.K. unchanged to 210 yen.

Nippon Electric Glass Co Ltd down 1 yen to 490 yen and Asahi Glass Co Ltd decreased 13 yen to 528 yen.

Fast Retailing Co. dropped 400 yen to 17,490 yen and J. Front Retailing Co. Ltd added 2 yen to 368 yen.

Mitsubishi UFJ Financial Group fell 2 yen to 340 yen and Sumitomo Mitsui Financial Group decreased 17 yen to 2,289 yen. Nomura Holdings, Inc closed down at 5 yen to 259 yen.

Nomura Holdings declined 1.9% on the worries that the rising stress in the euro zone may affect its international holdings and widening second insider scandal may avert company management.

Credit Saison Co Ltd declined 47 yen to 1,449 yen.

Tokyo Tatemono Co., Ltd closed down at 3 yen to 253 yen and Mitsui Fudosan slides 19 yen to 1,308 yen and Sumitomo Realty & Development Co. declined 52 yen to 1,648 yen.

Nippon Steel unchanged to 176 yen and JFE Holdings Inc decreased 12 yen to 1,272 yen.