Japan's Stocks Fall in U.S. on Demand Concern; Mizuho Advances

By Masaki Kondo

Oct. 2 (Bloomberg) -- Japan's stocks fell in the U.S. after manufacturing there contracted more than anticipated, triggering concern demand for Japanese-made goods will shrink.

U.S.-traded receipts of Sharp Corp., Japan's biggest maker of liquid-crystal display televisions, declined 2 percent from the closing share price in Tokyo yesterday, while construction- machinery maker Komatsu Ltd. dropped 2.1 percent. Those of Mizuho Financial Group Inc., the nation's second-biggest listed bank, gained 1.1 percent on speculation the U.S. Senate will approve the $700 billion financial-rescue measure.

``Behind the recent declines in stocks are concerns economies are slowing across the globe,'' Mitsushige Akino, who oversees the equivalent of $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. ``We're likely to see a slew of Japanese companies come out with lower earnings targets.''

The Bank of New York Japan ADR Index, which tracks American depositary receipts of Japanese companies, slid 0.6 percent. Nikkei 225 Stock Average futures expiring in December closed at 11,600 in Chicago, higher than 11,440 earlier in Osaka and 11,435 in Singapore.

Yesterday, the Nikkei climbed 1 percent to 11,368.26 in Tokyo on optimism the Senate will approve a revised form of the bank bailout that was previously voted down by the House of Representatives. The broader Topix index added 1.3 percent to 1,101.13, its first gain since Sept. 22.

The Institute for Supply Management's factory index declined to 43.5, the lowest since October 2001, and below the 50 dividing line between expansion and contraction. Economists had estimated the index fell to 49.5.

Baltic Drop

Adding to evidence that turbulence in financial markets is spilling over to the broader economy, the Baltic Dry Index, a measure of shipping costs for commodities, slumped for an eighth day, falling 6 percent. The Topix Marine Transportation Index had a correlation of 0.97 with the Baltic in the past year, meaning the two moved almost in tandem.

Democratic and Republican leaders of the U.S. Senate predicted a $700 billion bank bailout package will win approval. The Senate will vote after 7:30 p.m., Washington time, while the House will likely vote again on the measure on Friday, said a spokesman for House Speaker Nancy Pelosi.

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