Japan stocks rose for a second day on speculation corporate profits
will beat analyst estimates and after the rout in global equity markets
made shares cheap relative to earnings.
Panasonic Corp. jumped 8.9
percent on a report it may beat its profit forecast on higher
television sales. JFE Holdings Inc. and Nippon Steel Corp. advanced
after the Nikkei newspaper said they may boost their annual targets.
Nissan Motor Co., Japan's third-biggest carmaker, gained 8.9 percent
after a drop in its stock price drove its dividend yield to five times
the return on government bonds, prompting UBS AG to recommend buying
the shares.
The Nikkei 225 Stock Average gained 311.77, or 3.6
percent, to close at 9,005.59 in Tokyo. The broader Topix index
advanced 33.08, or 3.7 percent, to 927.37. Almost six stocks climbed
for each that fell on the Topix.
The Topix lost a fifth of its
value in the past month on concern the credit crisis that brought down
Bear Stearns Cos. and Lehman Brothers Holdings Inc. would lead to a
global recession. The average dividend yield for Topix constituents
reached 2.52 percent compared with the 1.57 percent yield on 10-year
government bonds, while the gauge's price fell below book value.
The
40 Topix-listed businesses that reported half-year earnings last week
posted an average 32 percent gain in profit, according to Bloomberg
data, indicating that some companies are weathering the economic
slowdown.
Panasonic, the world's largest maker of consumer
electronics, jumped 8.9 percent to 1,633 yen. The Osaka-based company
may report at least 220 billion yen ($2.16 billion) in operating profit
for the six months to Sept. 30, boosted by TV sales, the Nikkei said on
Oct. 18. In April, the company forecast first-half profit would decline
9.1 percent to 200 billion yen. Rival Sony Corp. climbed 7.6 percent to
2,625 yen.
JFE, Japan's second-biggest steelmaker, soared 9.2
percent to 2,430 yen, while bigger rival Nippon Steel advanced 4.4
percent to 330 yen. JFE may raise its annual estimate of pretax profit
to 510 billion yen from 450 billion yen this month because of falling
costs for materials and fuel and higher steel prices, Nikkei said
today. Nippon Steel may announce a similar revision on its earnings,
the newspaper said.
Nissan, whose dividend yield is 7.6 percent,
gained 8.9 percent to 527 yen, while smaller rival Daihatsu Motor Co.
advanced 6.5 percent to 961 yen. The companies had their investment
ratings boosted to ``buy'' from ``neutral'' by UBS, which cited recent
price drops.
Bridgestone Corp., the world's largest tiremaker,
jumped 9.5 percent to 1,874 yen, while Toyo Tire & Rubber Co.
gained 12 percent to 253 yen. Natural rubber for March delivery traded
at 185.20 yen a kilogram today, after falling to as low as 159.3 yen on
Oct. 17, the lowest price since July 2005. An index of rubber- product
makers had the biggest gain among 33 industry groups on the Topix.
European
stocks rose after Ericsson AB reported better-than-estimated earnings,
higher oil boosted energy shares and the Netherlands stepped up efforts
to ease the financial crisis.
all 18 western European markets
advanced. Ericsson, the world's largest maker of wireless phone
networks, jumped 16 percent. ING Groep NV rallied 29 percent after
receiving a 10 billion-euro ($13.4 billion) lifeline from the Dutch
government. Money-market rates declined.
Prudential Plc climbed 19 percent on a report the U.K.'s second-biggest insurer is in advanced talks to sell a stake.
European
Central Bank President Jean-Claude Trichet said banks should start
lending again after policy makers put them on ``the path'' of recovery.
Speculation that government efforts to shore up banks will bolster
the economy and profits helped drag European options lower for a second
day. The VStoxx Index, which measures the cost of using options as
insurance against declines in the Dow Jones Euro Stoxx 50 Index,
dropped 18 percent to 63.28 at 4:51 p.m. in London. The measure reached
a peak of 87.88 on Oct. 16.
Ericsson surged 16 percent to 58.40
kronor after reporting third-quarter net income of 2.8 billion Swedish
kronor ($380 million) which beat the 2.34 billion-kronor estimate of
analysts surveyed by Bloomberg. Citigroup Inc. reiterated its ``buy''
recommendation on the shares with a price estimate of 68 kronor after
the report.
ING jumped 29 percent to 9.48 euros, the biggest
percentage gain on record. The Dutch government will buy non-voting
preferred shares in the financial and insurance company and appoint two
representatives to the board of ING, which will scrap this year's final
dividend. ING fell a record 27 percent on Oct. 17 after predicting a
500 million-euro loss for the third quarter.
Shell, Europe's
largest oil producer, added 11 percent to 1,550 pence, while Total, the
region's third-biggest, gained 7.1 percent to 39.025 euros.
Crude
oil rose in New York on speculation OPEC will lower output in an
attempt to halt a slide in prices, which have fallen more than 50
percent from July's record.
Prudential rose 22 percent to 330.25
pence after the Sunday Times reported the insurer is in advanced talks
with investment funds in China and the Middle East to take a 20 percent
stake in and help finance a $15 billion offer for the Asian business of
American International Group Inc. The newspaper did not say where it
got the information.
Societe Generale SA slumped 3 percent to
43.93 euros on speculation France's second-biggest bank may have to
raise new capital. Spokeswoman Stephanie Carson-Parker was not
immediately available for comment.
European banks led by Deutsche
Bank and UniCredit SpA may need to raise a combined 73 billion euros,
Merrill Lynch & Co. analysts said in a note today. Societe Generale
may have to raise 6.5 billion euros, the analysts said.
Iberia
Lineas Aereas de Espana SA, which plans to merge with British Airways
Plc, soared by a record 26 percent to 1.77 euros after Spanish newswire
Efe said the U.K. carrier's pension deficit won't harm negotiations.
Veolia
Environnement SA tumbled 21 percent to 18.43 euros after the world's
biggest water company said its water and waste management businesses
have slowed, and that it is expects total investments to fall 34
percent to 4 billion euros ($5.4 billion) this year.
Stocks
rallied Monday as investors welcomed positive developments in the
credit markets and Fed Chairman Bernanke supporting the idea of a
second fiscal stimulus package.
In the end, the S&P 500 rallied
4.8%, settling at session highs thanks to a late-session surge in
buying interest. Strength was mostly broad-based, with all ten sectors
posting a gain. Volume, however, was on the light side with only 1.23
billion shares exchanging hands on the NYSE, compared to the one-year
average of 1.49 billion.
During testimony to the House Budget
Committee, Fed Chairman Bernanke said he feels the government's recent
efforts will help restore the financial system, but cautioned the
stabilization of the financial system will not quickly eliminate
economic challenges.
Given the likelihood of a weak economy for
several quarters, Bernanke said it would be appropriate for Congress to
consider a second fiscal stimulus. He feels that a fiscal package
should be targeted to boost overall spending and economic activity,
aimed at improving credit for consumers, home buyers, businesses and
other borrowers and limit long-term effects on the government's budget
deficit.
Meanwhile, overseas governments took more actions to help
alleviate the financial market turmoil. India cut its key lending rate
for the first time since 2004, South Korea said it will guarantee some
of the foreign debt held by its banks, and the Netherlands is injecting
approximately $13 billion in ING (ING 12.93, +2.28).
Credit markets
continue to show improvements. Short-term interbank lending in dollars,
measured by Libor, declined across all terms. The difference between
what banks pay each other for three-month loans and what the government
pays, known as the TED spread, declined 65 basis points to 2.96%. The
TED spread is well off its 4.34% high reached on Oct. 10, but levels
remain substantially above the historical average of roughly 0.4%.
In
corporate news, utility company Exelon (EXC 54.58, +0.08) made an
unsolicited proposal to acquire NRG Energy (NRG 25.00, +5.67) for
$26.43 per share, or $6.2 billion, in stock. The offer represents a 37%
premium to Friday's closing level. The utilities sector as a whole
climbed 8.1%.
Eaton (ETN 45.05, +0.63), Halliburton (HAL 20.80,
+2.54), and Hasbro (HAS 28.79, -1.33) topped estimates for their
respective latest quarters. On the negative side, Novartis AG (NVS
52.16, +1.22) and Mattel (MAT 14.07, -0.38) reported earnings that fell
short of expectations.
The better-than-expected results from Halliburton, and a 3.8% gain in oil prices, helped the energy sector spike 11.2%.
The
financial sector (+2.8%) underperformed on a relative basis, with
notable weakness in retail (-3.4%) and industrial (-2.1%) REITs.
In
economic news, September leading indicators rose 0.3%, although
August's decline of 0.5% was widened to 0.9%. Economists had forecast a
drop of 0.1% in September. The leading indicators report is mostly a
collection of previously announced economic indicators.