The Nikkei Took A Pasting Today

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Japan’s Nikkei had an off day, closing down 0.85%.

The country’s Topix index fell, halting a two-day gain, as paper companies and brokerages declined and the yen strengthened.

Daio Paper Corp., Japan’s third-biggest paper company by market value, slid 4 per cent. Kosei Securities Co. slumped 6.6 per cent, leading brokerages lower. Chubu Electric Power Co. lost 1.3 per cent after the utility’s rating was cut at Citigroup Inc. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, added 1.3 per cent after Bank of America Corp.’s Merrill Lynch unit recommended the shares.

The Topix fell 0.4 per cent to 1,229.63 as of 2:20 p.m. in Tokyo after rising as much as 0.5%. About two shares dropped for each that climbed. The Nikkei 225 lost 0.85% to 14,994.80. The yen gained 0.2% to 102.34 per dollar after weakening the past two days.

“Japanese stocks are taking a pause after rising fast recently,” said Ichiro Yamada, general manager of equities at Fukoku Mutual Life Insurance Co. “Stocks will struggle unless the yen extends losses further. That’s the only factor of concern for the market right now.”

The Topix climbed 7.4 per cent from a recent low on May 21 through yesterday amid optimism about the global economy. The gauge was still down 5.2 per cent for the year, the worst performer among 24 developed markets tracked by Bloomberg. The measure capped a world-beating rally last year as the Bank of Japan pressed ahead with its record monetary easing. The central bank is scheduled to meet June 12-13.

Thirty-three per cent of economists in a Bloomberg News survey forecast the BOJ will expand monetary stimulus at the end of October. Nine per cent of respondents see more easing in July, down from 38 per cent in a survey last month.

Stimulus Outlook

“The BOJ will add to easing eventually,” said Masaaki Yamaguchi, equity market strategist at Nomura Holdings Inc. “The bank has put off action because it doesn’t think the economy is bad. That means the economy is getting better and won’t be a negative for the market.”

Futures on the Standard & Poor’s 500 Index slipped 0.1 per cent. The equity measure yesterday capped its seventh record close in the past eight sessions, as small-cap shares rallied and Family Dollar Stores Inc. advanced with Analog Devices Inc. amid deals activity. The Dow Jones Industrial Average gained 0.1 per cent to an all-time high.

The Topix traded at 1.2 times book value as of yesterday, compared with 2.72 for the S&P 500 and 1.92 for the Stoxx Europe 600 Index.

In Australia markets were relatively flat with the ASX closing up 0.1% to 5,469.70.

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