Japanese Stocks Slump on U.S. Retail Sales, Yen; Inpex Drops

By Masaki Kondo

May 14 (Bloomberg) -- Japanese stocks fell the most this month after U.S. retail sales unexpectedly dropped in April, clouding the earnings outlook for makers of cars and electronics.

Toyota Motor Corp., the world’s biggest automaker by market value, retreated 3 percent. Sony Corp., which gets a quarter of its sales from the U.S., declined 4.9 percent after the yen strengthened. Inpex Corp., Japan’s largest oil and gas explorer, sank 5.1 percent after it forecast a drop in full-year profit and oil prices slid. Nippon Telegraph & Telephone Corp. surged 4.1 percent after saying it will raise its dividend.

The Nikkei 225 Stock Average declined 208.02, or 2.2 percent, to 9,132.47 as of 9:42 a.m. in Tokyo, the steepest drop since April 28. The broader Topix index fell 19.47, or 2.2 percent, to 869.28. The Nikkei traded at 130 times estimated profit for its member companies yesterday.

“The U.S. retail report stole confidence from investors that the global economy was headed for a recovery,” said Mitsushige Akino, who oversees about $629 million at Ichiyoshi Investment Management Co. in Tokyo. “Current valuations are prohibitive unless you believe companies will raise annual forecasts later this year.”

The Nikkei gained 5.4 percent this year through yesterday, and companies on the measure are estimated to pay dividends equivalent to 1.68 percent of average share prices, according to gauge compiler Nikkei Inc. That compares to the 1.45 percent return on 10-year Japanese government bonds.

In New York, the Standard & Poor’s 500 Index slid 2.7 percent as the Commerce Department reported a 0.4 percent decline in retail sales last month. Economists had estimated the number would be unchanged.

Yen, Oil

Toyota lost 3 percent to 3,550 yen, while closest rival Honda Motor Co. dropped 3.4 percent to 2,730 yen. Sony, the world’s No. 2 electronics maker, sank 4.9 percent to 2,450 yen.

The yen appreciated against the dollar to as much as 95.14 today, the strongest level since March 20, from 96.47 at the close of stock trading in Tokyo yesterday. Japanese businesses expect the currency to average 97.18 this fiscal year, according the Bank of Japan’s quarterly Tankan survey.

The U.S. sales report fanned concern falling consumer spending will curb demand for resources. Crude oil for June delivery lost 1.4 percent to $58.02 a barrel in New York, the steepest drop since April 27. Copper futures fell 2.6 percent.

Lower crude prices prompted Inpex to forecast a 61 percent tumble in net income this fiscal year, a filing with the exchange showed yesterday. Inpex fell 5.1 percent to 689,000 yen.

MSCI Index

Mitsubishi Corp., Japan’s biggest trading company by value, declined 4.9 percent to 1,642 yen, and rival Mitsui & Co. lost 4.5 percent to 1,126 yen. Both companies derive more than half their earnings from commodities.

NEC Electronics Corp., the fourth-largest chipmaker in Japan, decreased 11 percent to 921 yen. Rinnai Corp., which makes gas appliances, soared 6.6 percent to 4,190 yen.

MSCI Inc. said yesterday NEC Electronics, Takefuji Corp., Alps Electric Co. and Haseko Corp. will be removed from its MSCI Japan Index as of the close on May 29. Rinnai, GS Yuasa Corp. and McDonald’s Holdings Co. Japan Ltd. will be added, MSCI said. Changes to indexes can alter share prices as passively managed funds buy and sell stocks to mirror the benchmarks.

NTT, Japan’s largest telecommunications provider, surged 4.1 percent to 4,050 yen after saying it plans to raise its dividend by 9.1 percent to 120 yen ($1.26). That will bring the stock’s dividend yield to 3.1 percent based on yesterday’s close.

Nikkei futures expiring in June retreated 2.4 percent to 9,140 in Osaka and slumped 2.3 percent to 9,145 in Singapore.

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