Japan Stocks Fall on Decline in U.S. Shares, Weaker Dollar, Oil

By Masaki Kondo

Sept. 2 (Bloomberg) -- Japanese stocks fell the most in two weeks after U.S. financial companies had their biggest decline since June, the dollar and euro weakened against the yen and commodities prices slid.

Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, slumped 2.5 percent. Canon Inc., a camera maker that gets more than a quarter of its sales from the Americas, lost 2.8 percent even after U.S. manufacturing and pending homes sales increased more than estimated. Oil explorer Inpex Corp. declined 4.3 percent. Seven & I Holdings Co., Japan’s largest retailer, decreased 2.7 percent after cutting its annual earnings forecast.

“The market cannot avoid instability because current share prices are based not on an actual improvement in the economy but on expectations of a relatively steep recovery in company earnings next year,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $93 billion.

The Nikkei 225 Stock Average fell 2.4 percent to close at 10,280.46 in Tokyo, with all but five of its 225 companies declining. The broader Topix index sank 2 percent to 949.81, and all 33 industry groups dropped. Both gauges had their steepest decrease since Aug. 17.

The Nikkei, which has risen and fallen on alternate days since Aug. 14, has rallied 46 percent from its lowest close in more than a quarter century on March 10. That boosted the average price of stocks in the index to 40.2 times estimated net income, the highest level among benchmarks in the world’s biggest equity markets, data compiled by Bloomberg show.

Manufacturing, Home Sales

In New York, the Standard & Poor’s 500 Index slid 2.2 percent yesterday, the most since Aug. 17. The KBW Bank Index of 24 U.S. financial companies fell 5.8 percent, its steepest drop since June 22.

Equities fell even after industry reports pointed to an end of the U.S. recession. Manufacturing in August and contracts to buy previously owned homes in July increased more than economists had estimated, according to separate reports from the Institute for Supply Management and the National Association of Realtors. Both gauges rose to a level not seen since June 2007.

Mitsubishi UFJ sank 2.5 percent to 580 yen, and closest rival Mizuho Financial Group Inc. slid 2.7 percent to 219 yen. Banks as a group were the second-biggest contributor to the Topix’s slump, following electronics makers.

Canon, the world’s biggest maker of digital cameras, fell 2.8 percent to 3,500 yen. Toyota Motor Corp., which gets almost a third of its revenue in North America, lost 2.5 percent to 3,920 yen.

‘Weak’ Sentiment

The dollar depreciated to as low as 92.52 yen today, a level not seen since July 13, and the euro traded as low as 131.46 yen, its weakest level since July 15. That reduces the value of overseas sales at Japanese companies when converted into their home currency.

Inpex dropped 4.3 percent to 730,000 yen. Mitsubishi Corp., a trading company that gets more than a third of its sales from commodities, lost 2.4 percent to 1,831 yen.

Crude oil fell 2.7 percent to $68.05 a barrel in New York yesterday, the lowest settlement since Aug. 17. A gauge of six metals in London retreated 3.6 percent, the most since July 8.

Seven & I declined 2.7 percent to 2,170 yen after the operator of 7-Eleven cut its full-year net income target by 11 percent.

“There are signs of recovery in certain sectors of the domestic economy, but an overall recovery seems unlikely,” the company said in a filing with the Tokyo stock exchange yesterday. “Consumer sentiment remains weak.”

Nikkei futures expiring in September retreated 1.8 percent to 10,310 in Osaka and fell 1.6 percent to 10,320 in Singapore.

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