Japan's Stock Futures Fall on Concern Credit Turmoil May Linger

By Masaki Kondo and Makiko Kitamura

July 10 (Bloomberg) -- Japan's stock futures fell on concern turmoil in the global financial market hasn't reached an end and a slowdown in the U.S. economy will weigh down company earnings.

U.S.-traded receipts of Sumitomo Mitsui Financial Group Inc. fell 2.6 percent from the closing share price in Tokyo yesterday after Fitch Ratings said it may cut its credit rating on Merrill Lynch & Co. Advantest Corp., the world's biggest maker of memory- chip testers, declined 0.9 percent after Merrill Lynch said slowing demand in the U.S. and emerging markets will crimp Intel Corp.'s earnings.

``It's likely the drop in financial shares in the U.S. will have a big impact on the Japanese market,'' Mitsushige Akino, who manages the equivalent of $557 million at Ichiyoshi Investment Management Co. in Tokyo, said in an interview with Bloomberg Television. ``Domestic demand is bad, export-related demand is bad; it's going to be a weak day.''

Nikkei 225 Stock Average futures expiring in September last traded at 13,010 in Chicago, 0.8 percent lower than the close of 13,120 in Osaka and 1 percent down from 13,145 in Singapore yesterday. The Bank of New York Japan ADR Index, which tracks American depositary receipts of Japanese companies, slid 1.6 percent.

Merrill Lynch, the third-largest U.S. securities firm, plunged to the lowest in almost six years in New York yesterday after Fitch placed the brokerage on Rating Watch Negative, owing to its worsening earnings outlook. Meanwhile, Fannie Mae paid a record yield over rates on two-year notes on concern the largest U.S. mortgage-finance company doesn't have enough capital to weather the housing slump.

The Nikkei rose 0.2 percent to 13,052.13 in Tokyo yesterday. The broader Topix index added 0.2 percent, to 1,285.53.

Waning Spending

Corporate technology spending has diminished, and consumers in emerging countries have slowed purchases, hurting Intel's earnings, a Merrill Lynch analyst said yesterday. There were ``signs of slowdown'' last month, especially in China and Europe, the brokerage said.

Meanwhile, Cisco Systems Inc., the world's biggest maker of computer-networking equipment, may forecast revenue in the quarter to October will be little changed or decline from the preceding three months, UBS AG said yesterday. Corporate customers and telecommunications carriers may curb their spending this year, Nikos Theodosopoulos an analyst at the brokerage, said.

To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.