Rates on Hold in Japan; Nomura Plunges

Darlington Musarurwa
16 Jun, 2009
New York City

The Bank of Japan left its key lending rate in a unanimous decision unchanged at 0.1%. Weakness in new condo offerings in Tokyo and in mining sector stocks and in the U.S. manufacturing activities dragged markets in Asia and Japan lower.

[R]5:00AM New York, 7:00PM Tokyo – The Bank of Japan left its key lending rate in a unanimous decision unchanged at 0.1%. Weakness in new condo offerings in Tokyo, in mining sector and in manufacturing activities in the U.S. dragged markets lower.[/R]

U.S. manufacturing activity falls in June. Tokyo home offerings drop 19.4% in May.[/R]

The Bank of Japan left its key lending rate unchanged at 0.1% and new condo sales declined 19.4% in May. Manufacturing index in New York State declined more than expected in May and the index is widely followed as a harbinger of the manufacturing activities across the U.S.

The weakness in the regional manufacturing and weak condo sales dragged market indexes lower.

In Tokyo trading Nikkei 225 index declined 2.9% or 286.79 to 9,752.88, and the broader Topix Index shed 2.7% or 32.06 to 914.76.

In the first section of the Tokyo Stock Exchange 265 billion shares worth 1.8 trillion yen were traded and in the second section 628 million shares worth 5.7 billion yen changed hands.

Of the Nikkei 225 index stocks 12 rose, 212 fell, and one was unchanged. GS Yuasa Corp. led gainers in the index shares with a rise of 2.3% followed by East Japan Railways advancing 1.5%.

The BoJ Left Rates Unchanged

The Bank of Japan left its key lending rate at 0.1%. The central bank noted weak domestic spending and improving conditions for exports and production. The inventory replenishment in both domestic and international markets is likely to be affected by the developments in the financial markets.

U.S. Manufacturing Activity Falls in June

Federal Reserve Bank of New York reported yesterday that the conditions for New York manufacturers continued to deteriorate in June.

The general business conditions index fell 5 points to -9.4, while the new orders index remained negative and near last month’s level and the shipments index fell 6 points to -4.8. Inventories index declined and remained well below zero.

In addition, both the capital spending and technology spending indexes rose into positive territory for the first time since October of last year.

In the current survey, 56% of respondents reported reductions in overall capital spending in 2009, while just 20% reported increases.

The report notes that estimated capital spending for calendar 2009 across all participants averaged $1.9 million from $2.5 million in 2008.

Tokyo New Condo-Offerings Decline 19.4% in May

Nikkei News reported today the Real Estate Economic Institute said the number of new condominiums brought to the market in greater Tokyo slipped 19.4% to 3,538 units in May from the same period a year earlier, falling for the 21 consecutive months.

Bankruptcies to Rise 35%

Separately, the online edition of Nikkei News said the number of corporate bankruptcies is forecasted to rise 35% year-on-year in 2009 from 27% a year ago.

Gainers & Losers

Commodities tumbled as crude oil prices dropped 2% to $70.60 per barrel and gold prices shed 1.4% to $927.50 per ounce on the news manufacturing activity in the U.S. shrank in May.

Nippon Oil Corp. dropped 6.5%, Kobe Steel tumbled 6.5%, and Sumitomo Metal Industries tumbled 5.7%. Mitsubishi Corp dropped 5% to 1,881 yen.

Exporters declined after weak manufacturing report. Nissan Motor Company plunged 5.9% to 568 yen, Sony Corp dropped 3% to 2,550 yen and

Nomura Holdings plunged 8.8% to 817 yen, Daiwa Securities declined 7.6% to 647 yen and Mizuho Securities fell 6.3% to 299 yen.

Mitsubishi Estate dropped 6.6% to 1,566 yen and Chiyoda Corp dropped 6.5% to 773 yen.

Nikkei 225 Average Movers

Nomura Holdings Inc led the decliners in the Nikkei 225 index of 8.8% followed by losses in CSK Holdings Corporation of 7.8%, in Nippon Mining Holdings Inc of 7.6%, in Daiwa Securities Group Inc of 7.5% and in Credit Saison Co Ltd of 7.5%.

GS Yuasa Corp led gainers in the Nikkei 225 index with a rise of 2.3% followed by gains in East Japan Railway Co of 1.5%, in Kao Corp of 1.2% and Dainippon Sumitomo Pharma Co Ltd of 0.9%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 286.79 or 2.86% to 9,752.88, Hang Seng index in Hong Kong decreased 333.46 or 1.80% to 18,165.50, CSI 300 index in China lower 4.97 or 0.17% to 2,961.22. ASX 200 index in Australia decreased 69.20 or 1.72% to 3,962.50. The KL Composite index in Malaysia closed lower 17.05 or 1.56% to 1,074.12.

The Kospi Index in South Korea decreased 13.27 or 0.94% to 1,399.15.SET index in Thailand closed lower 15.38 or 2.51% to 596.54 and JSE Index in Indonesia decreased 39.51 or 1.91% to 2,030.37. The Sensex index in India increased 82.39 or 0.55% to 14,957.91.