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Market Update

Yen Weakness and Oil Drop Lifts Nikkei, Toyota Production Falls 1.1%

Author: Hiruki Nakamura
Last Update: 11:23 AM ET November 28 2014

4:30 PM Tokyo – Stocks in Tokyo gained and the yen eased after retail sales rose 1.4% and industrial production unexpectedly gained in Japan. Airlines in Tokyo gained after crude oil prices trade near $70 a barrel. The yen weakened for the first time in four days. Toyota said global vehicle production in October decreased 1.1%.

Market indexes in Tokyo closed higher and extended weekly advance after a barrage of economic reports showed weak housing market, decline in jobless rate and household spending fell more than expected.

The yen eased after retail sales data fell below expectations and the attest oil plunge contributed to worries that the Bank of Japan will struggle with accelerating inflation.

The crude oil futures plunged more than $4 a barrel after OPEC left its daily production target at 30 million barrels at a meeting in Vienna, Austria; despite the calls from Venezuela, Iran and Libya to trim production.

The daily supply exceeds the demand by one million barrels a day but Saudi Arabia is said to be under the U.S. pressure to keep the target on the supply and not on the maximum price.

U.S. and Western nations are in battle with Russia and are demanding that President Putin withdraw Russian army from Ukraine. Crude oil constitutes 70% of Russia’s exports.

Russia needs $100 a barrel to balance its budget.

In the year so far, Brent Crude price has declined 35% and West Texas Crude has dropped 30%.

Retail Sales Advances, Industrial Production Rises

The Ministry of Economy, Trade and Industry of Japan reported retail sales in October increased 1.4% followed by 2.3% jump in September.

Wholesales sales eased 0.1% and commercial sales that includes wholesale and retail sales rose 0.3%.

In a preliminary estimates the Ministry of Economy, Trade and Industry said seasonally adjusted industrial production in October unexpectedly rose 0.2% from the 2.9% increase in September.

For the year, production fell by 1% but less than 1.7% expected decline estimated by economists. Shipments increased 0.4% from the previous month but decreased 0.6% from a year ago month.

The survey conducted by the ministry forecasted industrial production in November to jump 2.3% and 0.4% in December.

Jobless Rate Declines

The Ministry of Internal Affairs and Communication announced jobless rate in October unexpectedly fell 3.5% compared to 3.6% in September.

In a separate report, the same department said annual core inflation in October dropped to 2.9% from 3% in September.

Consumer price index slid 0.3% but the core consumer price index, excluding fresh food edged up to 0.1%.

For the year, consumer prices in the Ku area of Tokyo in November a leading trend indicator jumped 2.1%.

Household Spending Falls 4%

The same ministry said household spending adjusted for inflation in October declined 4% from a year ago month and less than forecasted to 5%.

Average monthly expenditure of two-or-more-persons household slipped 0.7% and average monthly income for worker household fell 2.1% compared to 3.4% decrease in average consumption expenditure.

Housing Starts Remain Depressed

The Ministry of Land, Infrastructure, Transport and Tourism announced housing starts in October unexpectedly dropped 12.3% from a year ago month and plunged 14.3% from the previous month.

The decline was less than the 15% estimate and latest decrease was the lowest in four months.

For the year, housing starts totaled 904,000 in October compared to 880,000 in the previous month.

On media report, Japan’s tax revenue in fiscal 2014 is expected to increase by 1 trillion yen and revenue in the fiscal year to March is now estimated at about 51.5 trillion yen from the initial forecast of 50 trillion yen.

The Nikkei 225 Stock Average climbed 211.35 or 1.2% to 17,459.85 and the broader Topix index jumped 18.44 or 1.3% to 1,410.34.

For the week, Nikkei 225 increased 0.9% and for the month surged 13.4%.

The yen slipped 0.1% to 117.47 against one dollar.

Stocks in Review

Honda Motor Co Ltd gained 1.7% to 3,571.50 yen after the auto maker started its wind power plant on November 26 at a cost of 100 million reals in Brazil.

The company built nine wind turbines in the southern Brazil and still plans to build more wind power plants.

Mitsui & Co Ltd fell 1.1% to 1,637.50 yen after the trading company signed agreements with Gulf Energy Development Company Limited to acquire 30% stake in twelve gas fired power projects in Thailand with a total project cost of about 280 billion yen or $2.4 billion.

Mabuchi Motor Co., Ltd slipped 1.7% to 9,460 yen after the electric car maker said net sales in the nine-month ending in September climbed 12.5% to 89.63 billion yen from 79.65 billion yen a year ago period.

Net income in the period soared 46.8% to 12.84 billion yen compared to 8.74 billion yen and diluted earnings per share jumped to 366.07 yen from 249.53 yen.

The company forecasted net sales for the year to climb 8.4% to 117.5 billion yen and net income to increase 17.9% to 12.4 billion yen from a year ago period.

Toyota Motor Corp jumped 2.3% to 7,314 yen after the auto maker reported worldwide production in October fell 1.1% to 904,159 units and domestic monthly production plunged 6.1% to 345,738 units and production outside Japan dropped 2.3% to 558,421 units.

Domestic sales including overseas production, plummeted 5.2% to 174,164 units.

Takeda Pharmaceutical Co Ltd rose 0.6% to 4,972 yen after the pharmaceutical company plans to invest approx 9 billion yen for its Hikari plant.

The company plans to transfer certain production from Osaka plant to Yamaguchi plant and the transfer is expected to complete in fiscal 2018.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc