Japanese Stocks Fall, Halting Two-Day Gain, on U.S. Slowdown

By Masaki Kondo

Nov. 18 (Bloomberg) -- Japan's stocks fell, breaking a two- day gain, after manufacturing in New York contracted at the fastest pace on record, stoking concern a recession in the world's largest economy is deepening.

Honda Motor Co., which gets half of its sales in North America, lost 4.9 percent. Sony Financial Holdings Inc., which operates Japan's fifth-largest insurer by value, dropped 8.3 percent after first-half earnings fell by more than a quarter. Mitsubishi Estate Co., the nation's No. 2 developer, extended its decline to a sixth day on concern office vacancies are climbing.

The Nikkei 225 Stock Average declined 190.15, or 2.2 percent, to 8,332.43 as of 9:56 a.m. in Tokyo. The broader Topix index fell 11.98, or 1.4 percent, to 838.51.

``We are seeing U.S. economic numbers break one bad record after another,'' Tsuyoshi Kawata, a senior strategist at Tokyo- based Nikko Cordial Securities Inc., said in an interview with Bloomberg Television. ``The slump in the U.S. economy will surely be substantial.''

The Federal Reserve Bank of New York yesterday said its general economic index fell to minus 25.4, the lowest since tallies started in 2001. Readings below zero for the index signal manufacturing activity is shrinking. The International Monetary Fund said this month the U.S., Europe and Japan may have their first simultaneous recession in the post-World War II era.

Figures yesterday showed Japan slid into its first recession since 2001, and Economic and Fiscal Policy Minister Kaoru Yosano said today he isn't confident the nation's economy will expand next fiscal year.

Insurers, Developers

Honda, Japan's second-biggest automaker, slid 4.9 percent to 2,040 yen, while Sony Corp., which gets a quarter of its sales from the U.S., sank 3.4 percent to 2,020 yen. Canon Inc., the world's biggest camera maker, lost 3.8 percent to 2,825 yen.

Sony Financial slumped 8.3 percent to 267,200 yen, after saying net income dropped 27 percent in the six months to Sept. 30 because of losses on securities and an increase in insurance payouts. Sompo Japan Insurance Inc. dived 6.9 percent to 715 yen. Tokio Marine Holdings Inc., Japan's biggest listed insurer, dropped 5.6 percent to 2,945 yen.

Mitsubishi Estate, Japan's second-biggest developer, dived 7.7 percent to 1,289 yen, while market leader Mitsui Fudosan Co. sank 5.4 percent to 1,309 yen. Zecs Co., which offers real-estate securitization services, tumbled 10 percent to 3,360 yen. The Topix Real Estate Index fell for a sixth day and headed for the lowest close since January 2004.

Vacancy rates for offices in major cities including Osaka and Nagoya have been climbing, with Osaka's rate at a 2-year high, the Nikkei newspaper said today. Additionally, some cities are going to experience a glut of new office space in coming years that is unlikely to be filled, according the newspaper.

Nikkei futures expiring in December retreated 1.8 percent to 8,340 in Osaka and declined 1.4 percent to 8,335 in Singapore.

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