Japan Stocks Fall on Earnings Outlook; Citizen Poised to Drop

By Masaki Kondo

Nov. 11 (Bloomberg) -- Japanese stocks dropped on mounting concern that slumping demand will force companies to lower earnings forecasts.

Nomura Holdings Inc., Japan's biggest brokerage, declined 2.5 percent after Barclays PLC said Goldman Sachs Group Inc. may have its first quarterly loss. Mitsubishi Motors Corp., which expects operating profit to decline by half this year, slid 1.4 percent. Watchmaker Citizen Holdings Co. was poised to drop after cutting its annual earnings target by a third.

The Nikkei 225 Stock Average declined 147.34, or 1.6 percent, to 8,934.09 as of 9:06 a.m. in Tokyo. The broader Topix index fell 12.41, or 1.4 percent, to 904.24. All but three of 33 industry groups on the Topix retreated.

``In such a volatile market with low prospects for global economic growth, long-term investors are hesitant to buy in,'' Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.

In New York, the Standard & Poor's 500 Index slid 1.3 percent, led by financial shares. Barclays analyst Roger Freeman said Goldman's fourth-quarter loss will probably be about $2.50 a share, joining Merrill Lynch & Co., UBS AG, JPMorgan Chase & Co. and Morgan Stanley in estimating a loss for the firm. Goldman's shares tumbled to a five-year low.

Waning demand in the U.S. and Europe is dimming the earnings outlook for Japanese companies, prompting businesses from Toyota to Sony Corp. to slash their forecasts. Of 837 companies that have reported first-half earnings through Nov. 7, more than half reduced full-year profit targets, according to a report by Shinko Research Institute Co.

Delayed Recovery

Japanese corporate earnings are not likely to start recovering until the second half of fiscal 2010 at the earliest, Shinichi Ichikawa, chief equity strategist at Credit Suisse Group, wrote in a report yesterday. He lowered his 2008 pretax-profit estimate on Japanese companies to a 40 percent decline from a 30 percent drop.

Orders for machine tools tumbled 40 percent in October from a year earlier, the biggest slump since January 2002, the Japan Machine Tool Builders' Association said yesterday. With a decline in orders, toolmakers will likely post operating losses in the next fiscal year to March 2010, Hidehiko Hoshino, an analyst at UBS AG, wrote in a note.

Nikkei futures expiring in December retreated 2.4 percent to 8,900 in Osaka and slumped 2.3 percent to 8,895 in Singapore.

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