Nikkei Drops 1.8%, Elevated Tankan Business Confidence Index

Hiruki Nakamura
14 Dec, 2015
New York City

The Nikkei plunged on Monday and tested six-week low following the deepening correction in oil and commodities. Industrial production in October jumped 1.4%. Japan and India signed several agreements involving bullet train and nuclear power plants.

[R]4:30 PM Tokyo – The Nikkei plunged on Monday and tested six-week low following the deepening correction in oil and commodities. Industrial production in October jumped 1.4%. Japan and India signed several agreements involving bullet train and nuclear power plants.[/R]

The Nikkei average fell to a six-week low and weakening backdrop in the commodities market overshadowed trading in stocks.

Crude oil dropped to a new seven-year low and traded in New York as low $35.52 a barrel and traders looked for the price to test $30 level.

Also, the rout in copper, iron ore and coal also deepened as the demand from the construction sector in China continued to soften.

Even the positive reading of Tankan business survey and the strategic agreement between India and Japan could not improve the faltering market sentiment.

Tankan business quarterly survey, a closely watched confidence index of the Bank of Japan, showed that confidence at big manufacturers remained at 12, unchanged in the fourth-quarter from the previous three-month period.

The large companies plan to raise capital spending by 10.8% in the fiscal year ending March 2016, slightly down from the previously expected increase of 10.9%.

Despite expanding investment plans, companies show caution about the demand for exports in the next quarter, according to the Bank of Japan survey.

The seasonally adjusted industrial production in October jumped 1.4%, compared to 1.1% increase in September, the Ministry of Economy, Trade and Industry said.

On an annual basis, industrial output fell 1.4% in October, compared with 0.8% drop in the prior month. It was third consecutive monthly decline.

India and Japan signed a preliminary pact on civil nuclear cooperation after years of negotiations at the ninth annual summit between the two countries.

The two countries agreed on sharing technology, equipment and military information.

Japan will participate in large infrastructure projects in India, including the $5.5 billion Chennai-Bengaluru corridor project. Japan will provide $12 billion for constructing India’s first bullet train, as well as an incentive of $12 billion for Japanese companies investing in India.

The renminbi slipped to a four-year low against the U.S. dollar after the People’s Bank of China said it would measure the exchange rate against a broader basket of currencies.

In the trade-weighted basket, introduced late on Friday, the dollar accounts for 26.4% and the euro accounts for 21.4%.

The Nikkei 225 Stock Average declined 347.06 or 1.8% to 18,883.42 and the broader Topix index slumped 21.63 or 1.4% to 1,527.88.

The yen increased against the dollar to 121.22.

Stocks in Review

Kenedix Office Investment Corp closed unchanged at 544,000 yen after the real estate developer stated net sales in the year ending in October fell 2.8% from a year ago to 13.74 billion yen.

Net income in the year plunged 10.7% to 4.56 billion yen and earnings per share slipped to 11,273 yen from 12,859 yen in the same period a year ago.

The real estate developer estimated net sales in the year to drop 6.5% to 12.84 billion and net income to slump 14.4% to 3.91 billion yen.

Sekisui House Reit Inc decreased 0.7% to 128,600 yen despite reporting that net sales in the year ending in October soared 60.3% from a year ago to 3.38 billion yen.

Net income in the year jumped 92.6% to 1.95 billion yen and earnings per share slid to 2.51 yen from 2.53 yen in the same period a year ago.

Shoei Foods Corporation declined 3.2% to 1,380 yen after the dairy and confectionery products maker said net sales in the year ending in October advanced 8.6% from a year ago to 106.75 billion yen.

Net income in the year surged 55.2% to 2.60 billion yen and earnings per share rose to 137.72 yen from 86.23 yen in the same period a year ago.

The dairy and food maker forecasted net sales in the year to jump 3% to100 billion yen but net income is expected to decline 7.8% to 2.40 billion yen.