Japanese stocks rose for the first time in a week as speculation
U.S. lawmakers will salvage a bank- rescue package overshadowed the
lowest confidence in five years at domestic companies.
Nomura Holdings Inc., Japan's No. 1 brokerage, added 6 percent, while
rival Shinko Securities Co. gained 5.9 percent. Kawasaki Kisen Kaisha
Ltd., the nation's third-biggest shipping company, dropped to a
four-year low after transport fees for commodities completed their
biggest quarterly decline on record. The Topix index sank to the lowest
in almost four years yesterday after the U.S. House of Representatives
rejected the bank bailout.
``Investors can expect the U.S. government to bring some sort of rescue
measure eventually,'' said Hiroshi Morikawa, a Tokyo-based senior
strategist at MU Investments Co., which manages $14 billion. ``However,
the sense of relief won't last long, as the passage of such a bill
represents the consequences of our worsening global economy.''
The Nikkei 225 Stock Average climbed 108.40, or 1 percent, to close at
11,368.26 in Tokyo. The broader Topix rose 13.72, or 1.3 percent, to
1,101.13, its first gain since Sept. 22. Almost three stocks advanced
for every two that slumped on the Topix.
The U.S. Senate will vote tonight on a revised $700 billion
financial-rescue plan. Speculation of its passing drove the Standard
& Poor's 500 Index yesterday to its biggest rally since July 2002,
regaining more than half the ground it lost following the bailout's
defeat in the House.
Confidence among large manufacturers fell to minus 3 points in
September, the first negative reading since 2003, the Bank of Japan's
quarterly Tankan survey showed today. Large and small businesses now
expect pretax profit to fall 8.1 percent this year, almost twice as
much as three months ago, the report showed.
Nomura jumped 6 percent to 1,405 yen, recovering more than half of its
two-day, 9.7 percent slump. Shinko added 5.9 percent to 305 yen,
breaking a five-day losing streak. Sumitomo Mitsui Financial Group
Inc., Japan's third-biggest listed bank, gained 4 percent to 655,000
yen, while market leader Mitsubishi UFJ Financial Group Inc. climbed
3.4 percent to 923 yen.
Brokerages, yesterday's biggest losers among Topix industry groups, were today's second-biggest winners, trailing insurers.
T&D Holdings Inc., Japan's biggest listed life insurer, soared 6.2
percent to 5,800 yen, leading gains on the Nikkei. Nipponkoa Insurance
Co. leapt 7.1 percent to 617 yen, almost reversing a 6.5 percent
decline in the previous two days.
Takeda Pharmaceutical Co., the nation's largest drugmaker, jumped 5.1
percent to 5,520 yen, leading pharmaceutical makers to the
third-biggest gain among Topix groups.
European stocks posted their first back-to-back gains in a month as
banks jumped on speculation lawmakers will pass a $700 billion rescue
plan, overshadowing a report showing U.S. manufacturing contracted more
than forecast.
Barclays Plc, the U.K.'s third-largest bank, climbed 4.4 percent and
UBS AG rose 6.7 percent as the Senate set a vote for tonight on the
bailout bill. ArcelorMittal dropped 4.8 percent after the Institute for
Supply Management said manufacturing contracted in September at the
fastest pace since the last U.S. recession. Daimler AG and Porsche SE
fell more than 8 percent on forecasts that car markets will weaken.
Stocks traded in a roller coaster fashion before settling with a
modest loss on Wednesday as investors digested uncertainty surrounding
the government's financial relief plan, a disappointing manufacturing
reading and news that Warren Buffett is making another major investment.
The S&P 500 fell as much as 2.2% at its low, and climbed to a gain
of 0.1% at its high, before settling with a loss of 0.5%. Helping the
market pare its losses was word that Warren Buffett is investing $3
billion in General Electric (GE 24.47, -1.03).
GE announced late in the afternoon that it will raise at least $12
billion in a public common stock offering and is selling $3 billion in
preferred stock yielding 10% to Warren Buffett's Berkshire Hathaway
(BRK.A 135,600, +5,000). Berkshire will also get $3 billion in
warrants, granting the option to purchase GE at $22.25 per share within
the next five years. GE's move to shore up investor confidence came
after its stock fell as much as 10% earlier in the session.
Financial market relief plan negotiations are ongoing. According to
reports, the Senate is going to vote on its version of the plan this
evening. The Senate version is said to include provisions for an
increase to the FDIC's deposit insurance limit and tax breaks for
business and alternative energy. It's unclear if the House of
Representatives supports the plan.
In economic news, manufacturing contracted by a larger-than-expected
amount in September, although it does not necessary mean the broader
economy is contracting, according to the Institute for Supply
Management's national survey. The ISM Manufacturing Index fell to 43.5
from 49.9 (consensus 49.5) -- its lowest level since October 2001. ISM
prices paid, which includes energy and food but excludes crude oil,
fell a sharper-than-expected 23.5 to 53.5 (consensus 73).
Private nonfarm employment fell by 8,000 in September, according to
employment services firm ADP. Economists expected a drop of 50,000. The
better-than-expected report had a limited impact on the market, as the
ADP data has had a spotty record compared to government data. The
government employment report, which includes both public and private
nonfarm payrolls, is set for release on Friday. A decrease of roughly
100,000 jobs is expected.
August construction spending was unchanged month-over-month, which was
better than the expected decline of 0.5%, although the market paid
little attention to this report. On average, construction spending has
declined 0.3% each month in 2008.
In commodity trading, Crude oil futures fell 2.0% to $98.61 per barrel
and gasoline fell 3.7% to $2.37 per gallon. The government's weekly
energy inventory report showed a larger-than-expected increase in crude
inventories, and an unexpected increase in gasoline stockpiles.
In the end, four of the ten economic sectors posted a gain, led by financial stocks (+2.2%).
Industrials (-2.6%) was the main laggard following the weak
manufacturing data. Tech (-1.1%) also faced selling pressure. IBM (IBM
110.14, -6.82) dropped 6%, the most in three years, on market
speculation that the company was going to issue an earnings warning.
Treasury prices rose across all constant maturities as investors
remained concern about the credit markets. The benchmark 10-year note
rose 24 ticks, sending its yield down to 3.73%.