Japan Stocks Drop on U.S. Job Losses, Snap Seven-Day Rally

By Masaki Kondo

Jan. 8 (Bloomberg) -- Japan’s stocks dropped, ending a seven-day winning streak, after U.S. job cuts exceeded estimates and stoked concern a deepening economic slump will further reduce demand for Japanese-made products.

Nintendo Co., which sells four times more Wii game machines in the Americas than in Japan, dived 5.5 percent. Advantest Corp., the world’s biggest maker of memory-chip testers, slumped 12 percent after Intel Corp. said fourth-quarter sales fell. Inpex Corp., Japan’s largest oil explorer, lost 9 percent after crude oil dropped the most in more than seven years. Tokyo Electric Power Co. rose 1.3 percent, the first gain in four days, on speculation a stronger yen and cheaper oil will boost profit.

“U.S. employment shows where the global economy is headed,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $61 billion. “Investors have been too optimistic recently. We’re still in a harsh economic environment with no change for the better.”

The Nikkei 225 Stock Average declined 362.82, or 3.9 percent, to close at 8,876.42 in Tokyo, the steepest drop since Dec. 12. The broader Topix index fell 27.36, or 3.1 percent, to 860.89, with almost six stocks slumping for each that advanced.

Yesterday the Nikkei rose for a seventh day in a row, its longest winning streak since April 2006. U.S. President-elect Barack Obama’s $775 billion stimulus plan had raised expectations the world’s biggest economy would pull out of its yearlong recession. Benchmark constituents traded at 19.3 times estimated earnings for the next fiscal year, jumping from a low of 9.7 times on Oct. 27.

Electronics, Chips

U.S. employers cut an estimated 693,000 jobs in December, the most since ADP Employer Services began compiling its private report based on payroll data in 2001. The decline was larger than the 495,000 drop estimated by economists.

Nintendo sank 5.5 percent to 34,200 yen in Osaka trading, the steepest dive since Nov. 20. Sony Corp., which plans to cut 5 percent of its electronics workforce by March 2010, retreated 4.6 percent to 2,200 yen, partially erasing its 28 percent gain in the past seven sessions. Sharp Corp. slumped 6.5 percent to 839 yen. The company, the nation’s biggest liquid-crystal display television maker, said last month it will close some of its display panel production lines.

The Japanese currency strengthened against the dollar to as much as 92.38 today from 93.96 at the close of stock trading in Tokyo yesterday.

Reductions of jobs and production by Japanese electronics manufacturers come as a weakening outlook for the economy deters American consumers from spending. Intel, whose chips run about 80 percent of the world’s personal computers, yesterday said fourth-quarter sales fell 23 percent, indicating demand is waning in the technology industry.

Oil, Paper

Advantest plunged 12 percent to 1,439 yen, while Tokyo Electron Ltd., the second-largest producer of semiconductor equipment, slid 13 percent to 3,350 yen. The stocks fell the most since Oct. 16 and were the worst performers on the Nikkei.

Inpex tumbled 9 percent to 679,000 yen, while rival Japan Petroleum Exploration Co. dropped 5.8 percent to 4,230 yen. Mining companies posted the steepest decline among 33 industry groups on the Topix.

Crude oil for February delivery plummeted 12 percent to $42.63 a barrel in New York yesterday, the steepest drop since September 2001. A $1 price change in a barrel of Brent oil alters Inpex’s annual net income by 2.2 billion yen ($24 million), the company said in May. Oil rose as much as 0.7 percent today.

Lower Costs

Tokyo Electric, Asia’s largest power generator, jumped 1.3 percent to 2,760 yen. Osaka Gas Co. added 2.2 percent to 375 yen. Utilities, which posted the second-sharpest dive among Topix groups yesterday, were the biggest winners today.

“A stronger yen and cheaper oil will reduce costs of imported materials for domestic-oriented companies like papermakers and power generators,” said Mitsubishi UFJ Asset’s Ishigane. “Domestic-oriented shares should remain the main pillars for portfolios.”

A $1 change in a barrel of crude alters Tokyo Electric’s annual fuel costs by 18 billion yen, the company said in October.

Nikkei futures expiring in March retreated 4 percent to 8,870 in Osaka and slumped 3.6 percent to 8,870 in Singapore.

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