Japanese Stocks Advance on Commodity Prices, U.S. Manufacturing

Japan’s Nikkei 225 rose 0.3 percent to 10,681.83 at the 3 p.m. close of trading in Tokyo. The broader Topix index climbed 0.4 percent to 919.57, with about eight stocks advancing for every seven that declined.

Both indexes pared gains of more than 1 percent after the yen appreciated in the afternoon to its highest level against the dollar in a week, cutting the value of overseas sales at Japanese companies when converted into their home currency.

Topix Underperforms

The Topix climbed 5.6 percent last year, the lowest return among benchmark indexes of the world’s 40 largest stock markets, on concern the government will fail to revive economic growth and a stronger yen will hurt earnings. Stocks in the index trade at an average of 36 times estimated earnings, compared with 18 times for the Standard & Poor’s 500 Index in the U.S. and 13 times for the Dow Jones Stoxx 600 Index in Europe.

The S&P 500 added 1.6 percent in New York yesterday after the Tempe, Arizona-based Institute for Supply Management said its factory index rose to 55.9, the highest level since April 2006. The median forecast by economists was 54.3. Readings greater than 50 signal expansion.

Mitsubishi Corp. rose 2.5 percent to 2,376 yen, and Mitsui & Co., Japan’s second-largest trading company, added 2.9 percent to 1,373 yen, the two biggest contributors to the Topix’s advance. Inpex gained 1.8 percent to 728,000 yen.

Crude oil for February delivery rose 2.7 percent in New York yesterday, the highest close in more than 14 months, as freezing weather and improving global economies bolstered the outlook for fuel demand. Gold prices surged the most in two months, or 2 percent, and copper futures for March delivery climbed 1.8 percent to a 16-month high.

‘Global Recovery’

“We can see from the positive U.S. economic data and rising commodity prices that there is a strong anticipation of a global self-sustaining recovery,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co.

Shipping lines were the third-biggest gainers among the 33 industry groups in the Topix. The Baltic Dry Index, a benchmark for commodity cargo rates, added 4.5 percent yesterday in London, the first increase since Dec. 4.

Nippon Yusen K.K., Japan’s biggest shipping line by sales, climbed 3.5 percent to 296 yen. Mitsui O.S.K. Lines Ltd., the operator of the world’s largest merchant fleet, added 3.9 percent to 511 yen. Kawasaki Kisen Kaisha Ltd. advanced 3.7 percent to 279 yen.

Carmakers were the biggest drag on the Topix among its 33 industry groups, led by Toyota, after the yen strengthened. Toyota declined 2.2 percent to 3,805 yen, reversing an advance of 0.8 percent into its steepest drop since Nov. 27. Suzuki Motor Corp., Japan’s second-largest minicar maker and which derives more than 60 percent of its sales overseas, fell 1.8 percent to 2,260 yen.

Yen Hurts Automakers

The Japanese currency strengthened to as high as 91.64 against the dollar today, the most since Dec. 29, from 92.87 at the close of stock trading in Tokyo yesterday. It climbed to a 14-year high in November and averaged 93.59 in 2009, the highest annual level since currencies began trading freely in 1971.

“The yen’s strengthening to around 91 damped demand for exporter stocks and weakened market sentiment,” said Hiroshi Fujimoto, a fund manager at Tokyo-based Shinkin Asset Management Co., which oversees the equivalent of $3.9 billion.

Fast Retailing Co. fell 3.2 percent to 16,900 yen, the biggest drag on the Nikkei 225. The operator of the Uniqlo casual-clothing chain said average spending per customer fell 1.7 percent in December from a year earlier, while same-store sales climbed 12 and the number of customers gained 13 percent.