Japan’s industrial production rose less than economists forecast, suggesting that a recovery in the nation’s manufacturing sector is lagging a weakening yen.

Output rose 2.5 percent from November, when it declined 1.4 percent, the Trade Ministry said in Tokyo today. The median estimate of 25 economists was for a 4.1 percent gain. Production fell 7.8 percent from the previous year.

The yen has weakened more than 12 percent against the dollar in the past three months, the most among 16 major currencies tracked by Bloomberg. It was at 91.06 per dollar as of 8:52 a.m. in Tokyo. The Nikkei 225 Stock Average (NKY) has gained more than 16 percent since the beginning of December.

Japan’s three largest automakers -- Toyota Motor Corp. (7203), Honda Motor Co. and Nissan Motor Co. -- all reported falling domestic production in December from the previous month.

Manufacturing in China, Japan’s biggest export market, is expanding at the fastest rate in two years, bolstering prospects that economic growth there will accelerate for a second straight quarter.

Weaker Yen

A weaker yen makes products relatively cheaper in export markets and boosts overseas earnings for Japanese companies such as Toyota and Canon Inc. (7751) when repatriated.

Twelve analysts covering Toyota, Japan’s biggest car manufacturer, have raised their earnings estimates for the next fiscal year.
The nation’s gross domestic product shrank at an annualized 3.5 percent pace in the third quarter of last year, the second straight contraction and meeting the textbook definition of a recession.
 (Bloomberg)

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Asian stocks fell, with the regional benchmark index retreating from the highest since August 2011 on the busiest day of Japan’s earnings season, after the country’s industrial production missed estimates and U.S. growth unexpectedly stalled.

Nintendo Co., the world’s largest maker of game consoles, sank 4.7 percent in Osaka after forecasting an operating loss on lower-than-expected sales of its Wii U. Whitehaven Coal Ltd. fell 6.6 percent after saying first-half earnings will drop on lower prices. China Unicom Hong Kong Ltd. gained 1.8 percent in Hong Kong after the mobile-phone carrier said 2012 profit probably rose more than 50 percent.

Japan’s Nikkei 225 Stock Average (NKY) slid 0.5 percent after yesterday closing above 11,000 for the first time since April 2010. The nation’s industrial production rose 2.5 percent in December from the previous month, missing the 4.1 percent median economists’ estimate. More than 250 companies listed on Japan’s broader Topix Index are scheduled to report earnings today.

Kospi Index

Australia’s S&P/ASX 200 Index (AS51) declined 0.5 percent, while South Korea’s Kospi Index (KOSPI) retreated 0.3 percent. Taiwan’s Taiex Index slumped 0.3 percent even after its economy expanded more than estimated in the fourth quarter.

Hong Kong’s Hang Seng Index retreated 0.5 percent. The Shanghai Composite Index slid 0.2 percent, with trading volume 35 percent above its 30-day average at the time of day.

China Unicom

Among stocks that rose, China Unicom advanced 1.8 percent to HK$12.48 in Hong Kong. The nation’s second-largest mobile- phone company said 2012 net income probably increased more than 50 percent from a year earlier as it expanded its 3G and broadband user base. The carrier didn’t provide numbers.

Genting Singapore Plc gained 5.8 percent to S$1.55 after an executive at rival Las Vegas Sands Corp. said a Sands resort in the city had a “damned good quarter.” Genting and Las Vegas Sands operate Singapore’s two casinos.
(Bloomberg)

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Japan's Nikkei share average wrestled back almost 1 percent on Thursday, lifting off a
seven-week low as investors picked up stocks on better-than-expected earnings, but the rebound was seen as limited because of concerns over global demand.

Short-covering lent temporary support for battered stocks,while strong earnings for a few U.S. firms boosted Japanese companies in the same sectors.

But Canon, which has a large proportion of its sales in Europe, plummeted as much as 13.8 percent during the session, highlighting nerves about exposure to an unstable euro zone.

"I think the market has entered a downward spiral- it's three steps back and one step forward," said Yuuki Sakurai, CEO of Fukoku Capital Management. "There's no real problem with Canon the company itself, it's down to the extremely negative
market atmosphere at the moment."

The Nikkei gained 0.9 percent to close at 8,443.10 after slumping to just 0.8 percent above its year-to-date low of 8,295.63 on Wednesday.


Hitachi Construction Machinery Co Ltd, which had been hit by worries of a slowdown in China, gained 6.2 percent after it cut its annual profit outlook less than analysts have expected. It was helped by U.S. rival Caterpillar boosting its outlook, while competitor Komatsu Ltd rose 4.5 percent.

Robot maker Fanuc gained 5.3 percent after it maintained its half-year profit outlook on Wednesday.

TDK Corp advanced 3 percent after U.S. hard drive maker Western Digital Corp's earnings beat market expectations on record sales, assuaging fears of a slowdown in
the market.

TDK's exposure to the European market, hit by dwindling demand and a weak euro, has left it 11.9 percent down this month.

After one indebted Spanish region asked Madrid for aid last week and others seemed set to follow, fears that the euro zone's fiscal problems could yet deepen have dampened share prices of companies reliant on the region for sales.

Canon was one such stock, closing 7.8 percent down at a 40-month low after trimming its group net profit forecast by 14 percent to 250 billion yen ($3.2 billion), citing a slowdown in the global economy and the persistent strength in the yen.

"The yen isn't showing any signs of weakening and could get even stronger, which would mean the blue-chips that fought back today would slump again," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.

Many blamed the yen's gain -- about two percent versus the dollar and more than six percent against the euro -- as a major factor for the Nikkei's poor performance.

So far this month, the Nikkei is down 6.3 percent, underperforming most other markets except for southern European countries. Ex-Japan Asian-Pacific shares were down 1.2 percent in the same period.

The broader Topix index clawed back 1.2 percent to 714.91, although the gain came after it had fallen for 13 of the past 14 sessions.

OVERSOLD?
The market is likely to be oversold in the near-term, some market players say, after the ratio of short-selling rose to one of its highest levels in years, striking a 13-month high of 32.7 percent on Monday before dropping slightly to 31.9 percent on Wednesday.

"When we've had such a high level of short-selling in the past, the market usually rises within 20 business days, as short-sellers have to close their positions," said Jun Yunoki,strategist at Nomura Securities.

Among the battered shares that benefited from some short-covering was Panasonic Corp, with a gain of 2.7 percent on the day against a 23 percent loss on the month, and Sony Corp which recovered 4.9 percent after dropping 18.7 percent since June.

Elsewhere, Olympus jumped 9.6 percent after medical device maker Terumo said on Thursday it is proposing to invest 50 billion yen ($640 million) in Olympus and form a joint holding company.

Shares of Terumo, which is now competing with Sony in seeking a tie-up with Olympus, fell 0.8 percent.

Nomura Holdings was also lifted 5.7 percent on a report that its CEO would resign to take responsibility for the leaks on share offerings from within the company's brokerage unit.(Reuters)

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China’s economic growth slowed to 7.6 percent in the three months ended June, the sixth straight deceleration, as Europe’s fiscal crisis sapped exports and a crackdown on property speculation curbed domestic demand.


Growth Target

A survey by the center of 22 domestic and foreign banks and institutions had a median forecast for third-quarter expansion of 7.8 percent.

China’s overseas sales in the first half of the year rose 9.2 percent, while imports gained 6.7 percent, putting the government at risk of missing its goal of 10 percent expansion in trade this year.
(Source: Bloomberg)


‘Effective Stimulus’

Export growth may slow in coming months, surveys of manufacturing purchasing managers indicate. A June survey released July 2 by HSBC Holdings Plc and Markit Economics showed new export orders fell at their steepest pace in more than three years while a separate index released by the government a day earlier showed overseas demand contracted for the first time since January.


Willingness to Invest

Signs of weakening domestic demand include falling factory- gate prices and softening inflation. The producer price index dropped 2.1 percent in June from a year earlier, the fourth straight decline, while consumer prices rose 2.2 percent, the smallest increase since January 2010.

The combination has lowered investment returns for Chinese industrial companies, Song said. “This is not only a problem for monetary policy, but also the willingness of companies to invest.”


Reduce Taxes

First-half profit declines at hundreds of Chinese companies may increase pressure on the government to reduce corporate taxes as part of efforts to stem the economy’s slowdown. Net income fell from a year earlier for more than half of 760 listed companies to report results, worse than in the first six months of 2009, Societe Generale SA said in a July 19 note.

Moderating inflation has given the central bank more room to ease monetary policy. It announced the second reduction in interest rates in a month on July 5 and has lowered the proportion of deposits banks must set aside as reserves three times since it started cuts in November to boost lending.

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Global stocks rose and the dollar rallied broadly on Friday after a robust U.S. labor market report beat expectations and provided another sign the world's biggest economy is recovering.

Strong acceptance from private creditors for a Greek bond swap averted a messy default and added to a slightly bullish mood, but the losses forced on the debt holders also triggered the payment of insurance contracts.

A ruling by the International Swaps and Derivatives Association that a credit event had occurred cut into gains on Wall Street and pared losses in the bond market. The euro fell further, but the announcement was widely expected and the single currency snapped back to recoup rebounded a tad.

U.S. employment grew solidly for a third straight month in February as employers added 227,000 jobs to their payrolls, the Labor Department, even though the unemployment rate held at a three-year low of 8.3 percent.

The data offered encouragement for those who see the U.S. economy moving into a more sustainable stage of recovery that could lead the Federal Reserve to drop its easy money stance earlier that the market now perceives.

The dollar hits its highest level against the yen in nearly 11 months and rallied broadly against other currencies, while safe-haven government debt prices fell. Gold reserved early sharp losses to rise nearly 1 percent in heavy trading.

The Dow Jones industrial average closed up 14.08 points, or 0.11 percent, at 12,922.02. The Standard & Poor's 500 Index added 4.96 points, or 0.36 percent, at 1,370.87. The Nasdaq Composite Index gained 17.92 points, or 0.60 percent, at 2,988.34.

For the week, the Dow fell 0.4 percent, the S&P 500 rose 0.1 percent and Nasdaq gained 0.4 percent.

Three years ago on Friday marked the depth of market lows brought on by the financial crisis. The S&P 500 now is trading at levels last seen in June 2008, before Lehman's collapse later that fall spent markets into a downward spiral. It is still 200 points below its all-time high set in October 2007.

European shares rose, supported by the U.S. labor market report. Data from the United States and emerging markets has become a key driver for European companies, which face lackluster domestic growth, as underscored by Friday's weaker-than-expected industrial output from France, Italy and Britain.

The FTSE Eurofirst 300 index of top regional shares closed up 0.4 percent at 1,079.37 points.

The U.S. data lifted the dollar broadly to multi-month highs against other currencies and initially pushed commodity prices lower. Crude oil futures later rebounded, as the data countered dollar pressure and fading euphoria over Greece's debt swap. (Reuters)

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