Japan's Stocks Fall as Recession Concerns Mount; Mazda Plunges

By Masaki Kondo

Oct. 2 (Bloomberg) -- Japan's stocks fell after slumping auto sales and shrinking production in the U.S. added to evidence financial turmoil will lead the global economy into recession.

Honda Motor Co., which gets more than half its profit in North America, slid 4.5 percent and Mazda Motor Corp. plunged the most in seven years after U.S. sales declined. U.S. Daido Steel Co. tumbled 16 percent, sending steelmakers to a three-year low. Sumitomo Heavy Industries Ltd. sank 13 percent on concern slowing demand will hurt earnings. Shares gave up early gains as optimism faded a $700 billion bank-bailout approved by the U.S. Senate will give a boost to financial companies.

``Investors see increasing certainty in the global economy shifting from a slowdown to recession,'' said Hideyuki Ookoshi, who helps oversee about $365 million at Chiba-Gin Asset Management Co. in Tokyo. ``When automakers stumble, so do steelmakers. Manufacturing costs remain high, while demand is clearly falling.''

The Nikkei 225 Stock Average fell 213.50, or 1.9 percent, to close at 11,154.76 in Tokyo. The broader Topix index fell 24.16, or 2.2 percent, to 1,076.97, wiping out yesterday's gain and reaching the lowest since October 2004. Almost five shares declined for each that fell on the Topix.

Credit turmoil sparked by the collapse of the U.S. mortgage market has cost financial companies $589 billion globally, leading to the demise of Lehman Brothers Holdings Inc. and the government takeover of American International Group Inc.

The Institute for Supply Management yesterday said its factory index fell to 43.5, the lowest since October 2001, and below the 50 dividing line between expansion and contraction. Coinciding with the report was Honda's announcement its U.S. sales declined 24 percent last month, the biggest slump since November 1981. Sales of smaller rival Mazda fell 36 percent.

Nikkei futures expiring in December lost 2.1 percent to 11,200 in Osaka and declined 2.2 percent to 11,180 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.