Japanese Stocks Retreat as Oil, Metals Plunge; Canon Declines

By Masaki Kondo

June 23 (Bloomberg) -- Japanese stocks dropped to the lowest this month after the World Bank’s forecast of a deeper global recession sparked a slump in commodities.

Mitsubishi Corp., a trading company that gets almost half its sales from resources, slid 5.3 percent. Nomura Holdings Inc., Japan’s top brokerage, tumbled 5.4 percent following a plunge in U.S. financial shares. Canon Inc., which gets a third of its sales from the Americas, sank 2.8 percent as the yen rose to a three-week high against the dollar. Nippon Paper Group Inc. added 3.4 percent after Mitsubishi UFJ Financial Group Inc. said falling oil prices will reduce fuel expenses.

The Nikkei 225 Stock Average fell 276.66, or 2.8 percent, to close at 9,549.61 in Tokyo. The broader Topix index lost 20.79, or 2.3 percent, to 901.69. Both gauges sank to the lowest since May 29. In New York, the Standard & Poor’s 500 index slid 3.1 percent yesterday.

“A drop in the U.S. triggered sell-offs here, though the World Bank’s report was nothing more than an expedient reason for people to take profit,” said Yoshinori Nagano, who helps oversee the equivalent of $90 billion at Tokyo-based Daiwa Asset Management Co. “During this correction phase, bad news will likely get more attention than good.”

The Nikkei has rallied by more than a third from a 26-year low on March 10 amid optimism government stimulus efforts and monetary easing are helping to halt the global recession. The estimated price-earnings ratio on the gauge is 43.3 times compared with 15.1 times for the S&P 500.

The global economy will contract 2.9 percent this year, compared with a previous forecast of a 1.7 percent decline, the World Bank said in a report. The announcement was issued during stock trading hours in Asia yesterday.

The report sent commodities prices tumbling. A gauge of six metals in London plunged 5.4 percent yesterday, the steepest drop since Jan. 27. Crude oil lost 3.6 percent, the most since May 15, and fell as much as 1.7 percent to $66.37 a barrel today.

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