Japan Stocks Drop on Deepening Slowdown, Yen; Panasonic Slumps

By Masaki Kondo

Dec. 2 (Bloomberg) -- Japan’s stocks tumbled as a drop in U.S. and European manufacturing added to evidence the global recession will deepen.

Panasonic Corp., the world’s No. 1 maker of consumer electronics, slumped 6.4 percent, while Canon Inc., which gets 80 percent of its revenue overseas, slid 6 percent after the yen rose against the dollar and euro. Inpex Corp., Japan’s largest oil explorer, fell 8.9 percent after oil prices plunged. U.S. manufacturing shrank last month at the fastest pace since 1982, the Institute for Supply Management said yesterday, while that in Europe contracted the most since the tally began in 1998, according to Markit Economics.

The Nikkei 225 Stock Average declined 468.29, or 5.6 percent, to 7,928.93 as of 9:39 a.m. in Tokyo. The broader Topix index fell 39.86, or 4.8 percent, to 787.61, set for the lowest close since Nov. 20. More than nine out of 10 stocks fell on the Topix.

“The U.S. manufacturing report made it clear it’s going to take a while before we get out of this recession,” Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. “The stronger yen will directly hit Japanese manufacturers’ earnings.”

Credit losses and writedowns have reached nearly $1 trillion at global financial companies, causing lending to businesses and consumers to dry up. Falling demand pushed manufacturers to cut output worldwide, threatening to a prolong recession that started in the U.S. a year ago, according to the National Bureau of Economic Research, a private, nonprofit group of economists based in Massachusetts.

Global Cuts

The U.S. and European production reports came after the China Federation of Logistics and Purchasing said the nation’s manufacturing shrank the most on record.

Panasonic slumped 6.4 percent to 1,075 yen, headed for the lowest level since May 2003. Canon, the world’s biggest camera maker, slid 6 percent to 2,645 yen, while Honda Motor Co., which gets more than half its profit from North America, sank 7.8 percent to 1,867 yen. Olympus Corp., an endoscope maker that derives the biggest portion of overseas earnings from Europe, lost 8.6 percent to 1,765 yen.

The yen appreciated to as much as 92.89 from 95.24 at the close of stock trading in Tokyo yesterday, while strengthening versus the euro to as much as 117.24 from 120.88. A 1 yen change against the dollar alters Canon’s annual operating profit by 2.6 billion yen ($28 million), the company said in October.

Oil Slump

Inpex fell 8.9 percent to 533,000 yen, while closest competitor Japan Petroleum Exploration Co. slid 6.9 percent to 3,350 yen. Mitsubishi Corp., a trading company getting more than half its profit from commodities, lost 10 percent to 1,074 yen.

Crude oil for January delivery sank 9.5 percent to $49.28 a barrel in New York yesterday, the lowest settlement since May 2005 and the biggest one-day drop since Oct. 10. A $1 price change in a barrel of oil alters Inpex’s annual net income by 2.2 billion yen, the company said in May.

Nomura Holdings Inc., Japan’s biggest brokerage, retreated 7.8 percent to 625 yen, set for the lowest close since August 1984. The company yesterday said it will sell 100 billion yen in subordinated convertible bonds to Dai-ichi Mutual Life Insurance Co. Convertible bonds contain a provision that gives buyers the issuer’s stock at a fixed exchange ratio.

Nikkei futures expiring in December retreated 5.6 percent to 7,930 in Osaka and slumped 5.5 percent to 7,930 in Singapore.

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