The exposure of utility companies and banks to government plans to help Tokyo Electric Power address compensation claims after the Fukushima nuclear disaster continued to cast a shadow over the Nikkei 225 this week.
Tepco itself reported the biggest loss ever made by a Japanese company outside the financial sector after close of trade on Friday. The generator lost Y1,250bn ($15.3bn) for the last financial year as it struggled to come to terms with the financial costs of the world’s worst nuclear crisis since the Chernobyl disaster. It did not offer guidance for the year ahead and has yet to put a figure on the amount of compensation it is likely to have to pay.
Uncertainty over the toll that could be taken on Tepco’s peers and its financiers continued to dull wider risk appetite and kept Tokyo’s benchmark in a 228-point trading range. It finished the week 0.4 per cent higher overall at 9,607.08, having tested intraday highs of 9,731.12 on Thursday and lows of 9,502.39 on Tuesday.
It came as investors remained nervous of the wider implications of the losses and the outlook for compensation for the second consecutive week. Tepco’s biggest creditors, Sumitomo Mitsui and Mitsubishi UFJ Financial, fell 3.1 per cent to Y2,365 and 2.1 per cent to Y375 over the week respectively.
Other utilities remained in thrall to expectations that the government would split power generation operations from distribution networks as part of a review of energy policy. Kansai Electric Power lost 12 per cent over the week to Y1,331. Chubu Electric Power lost 14.1 per cent to Y1,222S.
Takeda Pharmaceutical provided a bright spot after it completed the $13.7bn acquisition of Swiss drug maker Nycomed. The stock rose 0.4 per cent on Friday to Y3,805, taking its weekly advance to 0.9 per cent.
European shares fell on Friday, with investors reducing their exposure to riskier assets as concerns over the euro zone debt crisis intensified after ratings agency Fitch downgraded Greece's credit rating.
The pan-European FTSEurofirst 300 index of top shares closed 0.4 percent lower at 1,136.12 points for the week.
Fitch pushed Greece's credit rating deeper into junk territory and warned of further downgrades if a credible plan to resolve the country's debt crisis was not found.
Banks fell on concern over exposure to Greek debt. Peripheral stocks slipped too.
Among the fallers were clothing retailers Hennes & Mauritz (HMb.ST) and Inditex (ITX.MC), which fell after U.S. rival Gap Inc (GPS.N) slashed its full-year profit outlook on rising cotton costs.
On the upside, Associated British Foods (ABF.L) gained after Exane BNP Paribas upgraded it to "outperform" from "neutral" on valuation grounds.
U.S. stocks finished the week lower, amid weak outlooks from retailers and as the dollar rallied on Greek debt jitters.
The S&P 500 was 0.2 per cent lower to 1,335.16 over the week. This follows losses of 1.7 per cent and then a fall of 0.2 per cent in the first two weeks of the month.
The Dow lost 0.5 per cent over the week while the Nasdaq declined 0.9 per cent.
Shares in Gap, the largest US clothing chain by sales, tumbled 17.5 per cent after it reported a 23 per cent drop in first-quarter profits and slashed its earnings forecast as profits were hurt by higher commodity costs. The company said costs would increase 20 per cent in the second half of the year and that it would not be able to pass on all of this to its consumers.
Shares in retailer Aéropostale dropped 17.7 per cent after it reported a 64 per cent drop in first-quarter earnings as the company also struggled with rising material costs.
Clothes group Ann was down 2.5 per cent after reporting a fall in margins.
A bright spot was the initial public offering from LinkedIn, the business-focused networking website. It made a spectacular first day of trading on Thursday, jumping 109.4 per cent from its initial public offering price.
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