Japan's Stocks End Losing Streak on Wells Fargo Earnings Relief

By Patrick Rial

July 17 (Bloomberg) -- Japanese stocks surged, snapping a four-day drop by the Topix index, after earnings from Wells Fargo & Co. eased concern bank finances will continue to deteriorate.

Mizuho Financial Group Inc., Japan's third-biggest bank by market value, rose to the highest in a month while Nomura Holdings Inc., the nation's biggest brokerage, had its sharpest advance in six weeks.

Wells Fargo soared by a third after reporting earnings that exceeded analyst estimates, helping the Standard & Poor's 500 Index to post its biggest gain in more than three months.

``Wells Fargo's profit came as a positive surprise,'' Yoshinori Nagano, a Tokyo-based senior strategist at Daiwa Asset Management Co., which manages about $94 billion, said in an interview with Bloomberg Television. ``There's a feeling now that the market has already taken account of any bad news on financials.''

The Nikkei 225 Stock Average climbed 143.40, or 1.1 percent, to 13,904.20 as of 9:39 a.m. in Tokyo. The broader Topix index jumped 19.05, or 1.5 percent, to 1,268.33. All but four of 33 industry groups on the Topix gained.

Japanese stocks were raised to ``neutral'' from ``underweight'' by Andrew Garthwaite, chief strategist at Credit Suisse Group. Japan's market provides a hedge against inflation, higher oil prices, and turmoil in credit markets, Garthwaite wrote in a note to clients. 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 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.

Mizuho rose 4 percent to 541,000 yen, the highest level since June 20, while Mitsubishi UFJ Financial Group Inc., the country's biggest lender by value, gained 4.2 percent to 966 yen, its biggest gain in six weeks.

Nomura soared 4.6 percent to 1,525 yen, the most since June 2. Smaller rival Daiwa Securities Group Inc. surged 4.8 percent to 920 yen after the Nikkei newspaper said it will form a brokerage alliance with Brazil's Banco Itau. A gauge tracking brokerages was the biggest winner among Topix industry groups.

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

Inpex Holdings Inc., Japan's biggest oil explorer, lost 3.4 percent to 1.14 million yen. Japan Petroleum Exploration Co., the second largest, declined 2.6 percent to 6,790 yen.

Denso Corp., the nation's largest auto-parts maker, lost 0.3 percent to 3,180 yen. Aisin Seiki Co., Japan's biggest maker of car transmissions, dropped 0.3 percent to 3,210 yen. Shares of both companies were cut to ``hold'' at Nikko Citigroup Ltd.

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