Japan Retail Sales Rise; Tokyo Down 5%

123jump.com Staff
29 Sep, 2008
New York City

Stocks in Japan in Tuesday trading dropped 5% after benchmark index lost 1.3% on Monday. Finanicals, commodities and shipping lines led the decliners in trading on Monday. The U.S. House voted down the bailout proposal of $700 billion. The U.S. stocks plunged 7% after the stunning defeat.

[R]5:00AM New York, 7:00PM Tokyo - Japan retail sales increase 0.7% in August.[/R]

Japan market averages fell as crude oil and metal prices declined, while shipping lines slid as the gauge of freight charges fell. Global markets remain hostage to the U.S. regulatory developments and status of the proposed bailout plan. While the plan is unpopular with voters, leadership of Democratic and Republican parties appeared to be confident of its passage.

The proposed bailout plan of $700 billion is the largest U.S. government intervention in its history.

Market Sentiment

In Tokyo trading Nikkei 225 fell 1.26% or 149.55 to 11,743.61, and the broader Topix Index plunged 1.7% or 20.02 to 1,127.87.

In the first section of the Tokyo Stock Exchange 17 billion shares worth 1.8 trillion yen were traded and in the second section 407 million shares valued at 3.6 billion yen changed hands.

Of the Nikkei 225 stocks 60 rose, 158 declined, and 7 were unchanged. Fast Retailing led advancers in the index shares with a rise of 5.11%.

Retail Sales Rise 0.7% in August

The Ministry of Economy, Trade and Industry reported on its Web site today that retail sales in August increased 0.7% from a year ago from a revised 2% in July on rising raw material and energy costs.

Economists had forecasted that sales will gain 0.2%.

METI added that sales of fuel slumped for the first time in 15 months in August when prices jumped to 185 yen per liter.

U.S. Congress Agrees on Rescue Plan

The U.S. House of Committee on Financial Services reported on its Web site that the U.S. Congress has agreed on a $700 billion package to bailout banks and financial institutions and will remove the illiquid assets from the balance sheet of these companies.

The 106-page bill follows extensive and intense negotiations that limited the authority of the U.S. Treasury Office and put provisions to limit executive pays at institutions that participate in the plan and provide for the government to take a stake in the future gains in the companies that may benefit from the plan.

Initially the U.S. Government will get $250 billion immediately to start buying the distressed assets from troubled financial institutions, while another $100 billion will be used at the discretion of the President.

However the final $300 billion will released only after approval by Congress next year. The bill is expected to be put to a vote in the House of Representatives today, while the Senate is expected to schedule a vote on Wednesday.

Separately the U.K. Treasury reported today that the UK government seized Bradford & Bingley and sold its branch network to Abbey National controlled by Banco Santander for £612 million.

Similarly, the governments of Benelux nations announced that they have agreed that the Belgium will invest 4.7 billion euros in Fortis Bank NV/SA for exchange of 49% equity stake, while the Netherlands will invest 4 billion euros in Fortis Bank Nederland in exchange of 49% stake and Luxembourg will pump 2.5 billion euros in Fortis Banque Luxembourg SA in exchange of 49% equity stake.

As a result of the interventions, Fortis now has core equity of 30 billion euros, which is 9.5 million euros more than the target and Tier 1 ratio above 9% and total capital ratio of 13%.

Maurice Lippens has also decided to step down from the company''s board of directors and a new Chairman will be recruited from outside the company after consultations with the Belgian government.

Gainers & Losers

Fast Retailing led advancers in the Nikkei 225 index shares with a rise of 5.11% followed by increases in Kikkoman Corp. of 4.47%, in Nichirei Corp. of 3.73%, in Chugai Pharmaceutical of 3.72%, and Nisshin Seifun of 3.58%.

Other domestic related stocks rose. Meiji Dairies advanced 2.62% and OJI Paper jumped 2.41%.

Isuzu Motors led decliners in the Nikkei 225 index shares with a fall of 10.46%, followed by losses in Mitsui & Co. of 8.36%, in Sumitomo Heavy of 8.24%, in Dowa Holdings of 8.19%, and Mazda Motor Corp. of 7.91%.

Shipping lines fell after the Baltic Dry Index, which measures freight charges, plunged 10%. Nippon Yusen lost 6.58%, Kawasaki Kisen slipped 6.27% and Mitsui O.S.K. Lines dipped 6.03%.

Commodity stocks also declined after crude oil for November delivery declined to $105.26. Inpex declined 6.13%.

Mitsubishi UFJ Buys UnionBanCal Corp.

Mitsubishi UFJ Financial Group reported on its Web site today that the lender together with its wholly owned subsidiary Bank of Tokyo-Mitsubishi UFJ Ltd. have completed cash tender offer to purchase all of the outstanding shares of U.S. financial institution UnionBanCal Corp.

By the time the offer expired midnight on Friday last week 29.8% or 41,736,256 shares had been validly offered and when added to the MUFG 64.4% this cumulatively amounts to 94.2% of UnionBanCal''s total outstanding shares. Shareholders who have tendered shares will be paid $73.50 per share.

The report notes that 3.8% of UnionBanCal outstanding shares will be delivered in the next three days, a development that will intimately lift MUFG equity to 98%.

Each share of UNBC common stock not bought in being converted to a right to receive $73.50 per share in cash.