Japan Stocks End Losing Streak on Receding Credit-Loss Concern

By Patrick Rial

July 17 (Bloomberg) -- Japanese stocks rose, snapping a four-day drop by the Topix index, as concerns eased that credit losses will continue to plague banks and cause capital shortages.

Mizuho Financial Group Inc., Japan's third-biggest bank by market value, rose to the highest in a month while Orix Corp., the nation's biggest leasing company, surged. Brokerage Nomura Holdings Inc. climbed the most in almost three months.

Wells Fargo & Co. soared by a third in New York trading after reporting earnings that exceeded analyst estimates and raising its dividend. A measure of U.S. banks rallied the most on record after slumping a quarter in the previous week.

``The huge swings in U.S. financial stocks indicate that investors have been bracing themselves for the worst possible outcome,'' said Akio Yoshino, chief economist at Societe Generale Asset Management (Japan), which oversees about $16 billion. ``It now looks like we're ready for a bear market rally.''

The Nikkei 225 Stock Average climbed 127.15, or 1 percent, to 12,887.95 at the close of trading in Tokyo, the sharpest gain since June 16. The broader Topix index jumped 14.37, or 1.2 percent, to 1,263.65. More than three stocks climbed for each that retreated on the benchmark. Volume on the main board of the exchange was the 10th-lowest for a full trading day this year.

Japanese stocks were raised to ``neutral'' from ``underweight'' by Credit Suisse Group analyst Andrew Garthwaite, who said the market provides a hedge against inflation, oil prices and turmoil in credit markets. The Topix has lost 14 percent in 2008, less than all but Brazil among the world's 10- largest equity markets, and it's the top performer among major Asian benchmarks.

Wells Fargo, Oil

Wells Fargo, the second-biggest U.S. mortgage lender, led a rally in U.S. financial shares after the company said net income last quarter was 53 cents per share, beating the 50-cent average estimate of analysts. The company lifted its dividend by 10 percent, alleviating concern it lacks capital.

Global stocks have lost more than $13 trillion in value since October as banks and financial companies posted $416 billion in credit losses related to U.S. mortgage assets.

Mizuho rose 4.6 percent to 544,000 yen, the highest level since June 20, while Mitsubishi UFJ Financial Group Inc., the country's biggest lender by market value, gained 3 percent to 955 yen. Orix jumped 5 percent to 15,250 yen.

Nomura, Japan's biggest securities company, climbed 5 percent to 1,531 yen, the most since April 28. Daiwa Securities Group Inc., the No. 2 brokerage, surged 5 percent to 922 yen after the Nikkei newspaper said it will form an alliance with Brazil's Banco Itau.

Worst to First

Brokerages and non-bank financial companies had the biggest gains among Topix industry groups, rising 5 percent and 3.8 percent respectively. They were the two worst-performing groups since the Topix began a decline from its year-high on June 4.

``This doesn't look like much more than a one-day rebound,'' said Hideyuki Ookoshi, who helps oversee the equivalent of $365 million at Chiba-Gin Asset Management Co. ``Investors want to confirm where earnings are headed before taking a strong stance.''

Elsewhere, oil continued to slide after U.S. inventories unexpectedly increased, adding to evidence record prices are reducing demand. Crude futures dropped 3 percent to $134.60 in New York, extending the previous day's 4.4 percent slump.

Inpex Holdings Inc., Japan's biggest oil explorer, lost 0.9 percent to 1.17 million yen. Japan Petroleum Exploration Co., the second largest, declined 2.2 percent to 6,820 yen.

Denso Corp., the nation's largest auto-parts maker, lost 2.5 percent to 3,110 yen, making it the second-biggest loser on the Nikkei. Its shares were cut to ``hold'' at Nikko Citigroup Ltd. due to a forecast for slower production growth by its main customer, Toyota Motor Corp.

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