Japan Stocks Rebound on U.S. Recovery Optimism, Metal Prices

By Masaki Kondo

Feb. 4 (Bloomberg) -- Japanese stocks rallied from a three- day drop as an unexpected gain in U.S. home sales sparked optimism a recovery in the world’s biggest economy will prompt greater demand for resources.

Sumitomo Metal Mining Co., Japan’s No. 2 copper producer, leapt 7.1 percent after prices for the metal climbed, while Honda Motor Co., which gets more than half its profit from North America, jumped 4.6 percent. Mitsui O.S.K. Lines Ltd., the nation’s No. 2 shipping line, added 3.4 percent after commodity- shipping fees increased for the longest stretch in four months.

“It’s about time investors prepared for a possible rebound in resources and shipping as the global economic slump bottoms out,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion. “These shares will be the first ones to climb up from the bottom.”

The Nikkei 225 Stock Average added 168.58, or 2.2 percent, to 7,994.09 at the 11 a.m. break in Tokyo. The broader Topix index rose 10.47, or 1.4 percent, to 784.26, with 27 of its 33 industry groups advancing. Both gauges climbed for the first time since Jan. 29.

The Nikkei plunged by a record 42 percent last year and another 9.8 percent in January, the steepest monthly slump since October. The U.S., Japan and China are among countries seeking to revive their economies through interest-rate cuts, capital injections into banks and public spending.

The Nikkei’s members trade at an average 25.8 times estimated net income for this fiscal year, according to Nikkei Inc., the benchmark compiler. Stocks on the Standard & Poor’s 500 Index trade at 12.8 times projected profit.

Commodities, Cars

Sumitomo Metal leapt 7.1 percent to 909 yen, sending a gauge of metal producers to the biggest gain among Topix groups, followed by an index of precision-instrument makers. Inpex Corp., Japan’s largest oil explorer, advanced 7 percent to 715,000 yen, and Mitsubishi Corp., a trading company that gets more than half its profit from commodities, added 5.6 percent to 1,292 yen.

A measure of six metals traded in London rallied 5.5 percent yesterday, while copper futures for March delivery climbed 6.4 percent in New York. Copper rose as much as 1 percent today. Crude oil gained for a second day in New York after the president of the Organization of Petroleum Exporting Countries said the group may reduce output further.

Honda, Japan’s second-biggest automaker, leapt 4.6 percent to 2,155 yen, and Toyota Motor Corp. surged 4.5 percent to 3,010 yen. Canon Inc., which earns a third of its sales from the Americas, added 4.2 percent to 2,510 yen.

The U.S. index of pending home resales climbed 6.3 percent in December from the previous month, the first advance since August, the National Association of Realtors said yesterday. Economists had estimated the index would be unchanged.

Severance Pay

Hoya Corp., Japan’s largest maker of optical glass, jumped 6.7 percent to 1,716 yen, even after cutting its full-year profit projection by almost half and saying it will book about 10 billion yen ($112 million) for severance pay.

“We are positive on Hoya’s move to quickly enact structural reforms,” Shin Horie, an analyst for Goldman Sachs Group Inc. wrote in a note to clients dated today. The reduction in fixed costs will boost the company’s earnings in the year to March 2010, said Horie, who maintained his “buy” rating on the stock.

Mitsui O.S.K. added 3.4 percent to 604 yen, while smaller rival Kawasaki Kisen Kaisha Ltd. advanced 2.6 percent to 362 yen. The Baltic Dry Index, a measure of shipping costs for commodities, jumped 4.5 percent yesterday, extending its best start to a year since at least 1986, on demand for hauling iron ore to China.

Nikkei futures expiring in March added 3 percent to 8,000 in Osaka and gained 2.5 percent to 7,980 in Singapore.

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