Japan Stocks Slump; Nikkei Losing Streak Is Longest in 7 Months

By Patrick Rial

June 27 (Bloomberg) -- Japanese stocks slumped, sending the Nikkei 225 Stock Average to its worst losing streak in seven months, as oil surged, the dollar weakened and analysts predicted more losses at U.S. financial institutions.

Fanuc Ltd., the world's largest maker of industrial robots, dropped the most in more than two months. Sumitomo Mitsui Financial Group Inc., Japan's second-largest bank by market value, led financial shares lower. The country's household spending fell while inflation surged, government reports showed today.

``This year is hopeless for the U.S. economy,'' said Masaru Hamasaki, a senior strategist in Tokyo at Toyota Asset Management Co., which manages the equivalent of $3.3 billion. ``Funds are shifting their money into commodities like oil, which is boosting inflation figures, while rate hikes are powerless against that kind of movement.''

The Nikkei 225 Stock Average declined 307.20, or 2.2 percent, to 13,515.12 as of the 11 a.m. break in Tokyo, marking a seventh- consecutive drop for the gauge, the longest since November. The broader Topix index fell 27.31, or 2 percent, to 1,317.48.

For the week, the Nikkei has retreated 3.1 percent, while the Topix is down 2.9 percent. Japan is still the second-best performing market among the world's 10 largest this year.

Fanuc, which depends on overseas sales for more than two- thirds of its revenue, dropped 4.7 percent to 10,650 yen, the biggest fall since April 10. Sony Corp., the maker of the PlayStation 3 game console, lost 4 percent to 4,860 yen. Mitsubishi Motors Corp. fell 2 percent to 196 yen after the Nikkei newspaper said the automaker will reduce U.S. production by 10 percent this business year.

Record Oil

Crude oil for August delivery rose yesterday as much as 4.3 percent to top $140 a barrel for the first time, after Libya said it may reduce production. Meanwhile, the dollar slumped to as low as 106.62 yen in New York trading, a level not seen since June 11, dimming the profit outlook for Japanese companies reliant on overseas sales.

Household spending declined 3.2 percent, the most since September 2006, Japan's statistics bureau said. Core consumer prices climbed 1.5 percent from a year earlier after rising 0.9 percent in April.

Sumitomo Mitsui lost 4 percent to 824,000 yen. Aiful Corp. continued its slump this week following a June 23 report from Lehman Brothers Holdings Inc. saying the lender's parent company may be insolvent. Japan's largest consumer finance company by assets slid 7.1 percent to 1,198 yen, a record low. Aiful said today it may sue Lehman, saying it has no problem with funding.

Urban Corp., a property developer, lost 15 percent to 293 yen, the lowest since June 2004, after announcing a convertible bond sale to pay off debts, highlighting the difficulty real estate companies face in obtaining favorable financing.

Citigroup Writedowns

Goldman Sachs Group Inc. told investors yesterday to sell shares of Citigroup Inc., the largest U.S. bank, as writedowns may exceed $8 billion for the current quarter. Goldman also reversed its forecast for Merrill Lynch & Co. to a loss this quarter, helping make financials the worst performers among U.S. stocks yesterday.

The Standard & Poor's 500 Index plunged 2.9 percent, its biggest drop in three weeks.

``With higher oil, the weaker dollar and unease about the financial market, there doesn't seem to be much that can be done to alleviate the current situation,'' said Masayoshi Yano, a senior market analyst at Meiwa Securities Co. in Tokyo.

Tokyo Electric Power Co., Asia's biggest power producer, jumped 3.4 percent to 2,625 yen after Nomura Holdings Inc. raised its rating on the shares to ``neutral'' from ``reduce,'' citing the company's plan to lift electricity charges.

Nikkei futures expiring in September lost 2.2 percent to 13,540 in Osaka and fell 2.5 percent to 13,545 in Singapore.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net.