Japan Stocks Retreat on Slowing Retail Sales, U.S., Europe Jobs

By Masaki Kondo

July 3 (Bloomberg) -- Japanese stocks dropped on retailers’ slowing sales and after worsening U.S. and European job data fueled concern the global economic slump will be prolonged.

Seven & I Holdings Co., the nation’s largest retailer, plunged 5 percent after reporting a record quarterly slump in profit. Mitsui O.S.K. Lines Ltd. dropped 3 percent after commodity cargo fees fell to the lowest level in three weeks. Orix Corp., Japan’s largest non-bank financial company, surged 7.1 percent even after saying it will sell new shares, which will dilute shareholder value by as much as a fifth.

“Household spending won’t recover anytime soon,” said Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co., which manages about $13 billion. “Consumers are flocking to discounted products and that may damage the economy through deflation.”

The Nikkei 225 Stock Average slid 60.08, or 0.6 percent, to close at 9,816.07 in Tokyo. The broader Topix index lost 3.40, or 0.4 percent, to 920.62. The volume of shares traded in Tokyo declined to a level not seen since March 10.

For the week, the Nikkei lost 0.6 percent and the Topix decreased 0.7 percent.

The Nikkei soared 22.8 percent in the three months to June 30, the second-biggest gain on record, on optimism the global economy was stabilizing. Companies on the gauge are expected to pay dividends equivalent to 1.7 percent of their share prices, lower than U.S. and European counterparts.

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Seven & I dropped 5 percent to 2,190 yen, making it the biggest drag on the Topix. Net income tumbled 28 percent in the three months ended May 31, the steepest slide in quarterly net income since the company was formed in 2005. Worsening household income and job markets prompted consumers to save money, the company said in a filing with the Tokyo Stock Exchange.

Fast Retailing Co., the nation’s largest clothing retailer, dived 2.9 percent. The company said yesterday its average June customer spending fell the most this year. Isetan Mitsukoshi Holdings Ltd., a department store operator, sank 4.9 percent.

In New York, the Standard & Poor’s 500 Index slumped 2.9 percent after a government report showed employers cut more jobs than economists had estimated in June. Europe’s unemployment rate jumped in May to the highest level since 1999.

“It took years for us to get into this mess, and it’s going to take us more than a few months to turn it around,” U.S. President Barack Obama said.

Shipping Fees

Mitsui O.S.K. dived 3 percent to 593 yen. Iino Kaiun Kaisha Ltd., which operates oil, chemical and gas tankers, sank 3.3 percent. The Baltic Dry Index, a measure of shipping costs for commodities, fell 1.9 percent yesterday to the lowest level since June 12.

“The worsening of U.S. job figures is causing concerns the recession may be drawn out,” said Satoshi Yuzaki, a section manager at Takagi Securities Co. “That’s hurting shipping shares.”

Bridgestone Corp., the world’s largest tiremaker, jumped 1.8 percent, while Sumitomo Rubber Industries Inc. climbed 2 percent. Daiwa Securities Group Inc. lifted its ratings on the two companies to “outperform,” from “neutral.”

Orix leapt 7.1 percent, making it the second-biggest winner on the MSCI World Index. The company will raise as much as 100 billion yen ($1.04 billion) through share sales for loan repayments and investment, the company said yesterday.

“Orix’s financial position is very healthy,” said Shiro Yoshioka, an analyst at Japaninvest KK in Tokyo. “Orix is probably preparing to expand its business, which could boost profit.”

Nikkei futures expiring in September fell 0.5 percent to 9,840 in Osaka and slipped 0.8 percent to 9,820 in Singapore.

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