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Japanese stocks snapped a two-day rally, extending losses for the week, on prospects Europe’s finance chiefs will face international calls today to contain their debt crisis before a gathering of Group of Seven nations.
Fanuc Corp. (6954) fell 7.6%, the biggest slide on the Nikkei 225 (NKY) Stock Average, after a report yesterday showed growth in Japan’s machine tool orders slowed.
Toyota Motor Corp. (7203) lost 0.7%.
Marubeni Corp. (8002) gained 3.2% and Toyota Tsusho Corp. (8015) rose 1.8% after SMBC Nikko Securities Inc. boosted equity ratings on the trading companies.
The Nikkei 225 Stock Average fell 0.6%. The Topix dropped 0.2%. For the week, the Nikkei fell 2.4%, while the Topix lost 1.8%.
Komatsu maintained losses after China’s inflation eased in August from a three-year high, giving policy makers more slack to pause monetary tightening. Consumer prices climbed 6.2% from a year earlier, the National Bureau of Statistics said.
Among stocks that fell were Toyota, dropping 0.7%, and Nintendo Co., sliding 2.3%.
Marubeni gained 3.2% after SMBC Nikko raised its rating on the firm to “outperform” from “neutral,” saying favorable earnings may boost dividend payouts.
The brokerage also lifted Toyota Tsusho’s rating to “neutral” from “underperform,” saying earnings may rise as demand from carmakers increases and on better cost controls. Toyota Tsusho rose 1.8%.
European stocks fell for the first week in three amid concern policy makers won’t be able to stop the region’s sovereign debt crisis from growing and damaging the economic recovery.
Societe Generale SA and Banco Comercial Portugues SA (BCP) led a measure of European bank shares to the lowest since March 2009.
Royal Bank of Scotland Group Plc (RBS) and Barclays Plc (BARC) each sank 13% as 17 lenders were sued by the U.S. over the sale of mortgage-backed securities and interbank lending rates climbed.
European Central Bank President Jean-Claude Trichet on Sept. 8 said threats to the euro region have worsened and inflation risks have eased. Planned rescue loans to Greece have been put in doubt as countries including Finland demand the country provide collateral in exchange for the funds.
The cost of insuring against default on European financial companies rose to a record this week as the ECB comments added to concern lenders are finding it harder to access funding markets. Credit-default swaps on Greek government debt surged to an all-time high, signaling a 91 percent chance the nation will fail to meet debt commitments, after its economy shrank more than previously reported.
Porsche SE plunged 15% in the week and posted the worst decline in more than two years today after saying efforts to combine with Volkswagen AG by the end of 2011 had failed because of pending lawsuits. Preferred shares of Volkswagen, Europe’s largest automaker, slid 5%.
Verbund AG tumbled 16%, the most since 2008, after Austria’s biggest power company cut its guidance for 2011 and gave a “cautious” outlook for next year.
YIT Oyj, Finland’s biggest builder, slid 17% after saying excessive levels of ammonia were found in residential units it built in St. Petersburg, Russia.
U.S. stocks fell, erasing a weekly gain for the Standard & Poor’s 500 Index, on speculation Greece may default on its debt and deepen an economic slowdown.
The S&P 500 has fallen as much as 18% from a three- year high on April 29 on concern about Europe’s debt crisis and an economic slowdown.
Questions over Greece’s ability to meet the terms of its rescue package are dogging the nation as bondholders weigh whether to participate in a debt exchange that’s crucial to a second bailout. The nation is seeking preliminary responses from bond investors to the proposed swap. Greece has no plans to publish details of anticipated participation in its debt-swap program this week or next, said Petros Christodoulou, head of the country’s debt management office.
Greece is committed to “full implementation” of its bailout agreement, the country’s finance ministry said in a statement. The country rejected default talk as “organized speculation,” according to the statement.
In a sign officials are increasingly split over the best way to fight Europe’s debt crisis, Juergen Stark resigned from the European Central Bank’s Executive Board. Stark stepped down after protesting the bank’s bond purchases on a conference call earlier this week, said a euro-area central bank official familiar with the meeting.
Stocks also fell on speculation Congress won’t pass President Barack Obama’s $447 billion plan to boost the economy. The president, speaking before a joint session of Congress yesterday, demanded six times that lawmakers act “right away” on a plan that would boost spending on infrastructure, stem teacher layoffs and cut in half the payroll taxes paid by workers and small business owners.
Benchmark gauges fell yesterday as Federal Reserve Chairman Ben S. Bernanke disappointed investors by not detailing new plans to boost growth in the world’s largest economy in a speech to economists in Minneapolis. Bernanke stopped short of signaling what he thinks is the Fed’s best option to aid the economy, repeating points from his speech on Aug. 26 in Jackson Hole, Wyoming.
The S&P 500 may sink to as low as 970 because Wall Street analysts’ earnings estimates are too optimistic, according to MKM Partners LLC’s Michael Darda.
The 2012 forecast for S&P 500 company profits of about $108 a share may have to come down by as much as 30 percent, said Darda, chief market strategist at the Stamford, Connecticut- based research and trading firm. He cited the history of U.S. business cycles and the relationship between bond yields and earnings in making the prediction.
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