Japanese Stocks Decline on Concern Greek Debt Crisis Is Worsening

Japanese stocks fell, dragging the broader Topix Index to a second day of decline, after former Federal Reserve chairman Alan Greenspansaid a default by Greece is “almost certain.”

Canon Inc. (7751), a camera maker that counts Europe as its biggest source of revenue, slid 0.4 percent. Tokyo Electric Power Co., the utility at the center of the worst nuclear crisis in 25 years, slumped 9.1 percent after the head of Japan’s banking lobby said lenders won’t consider forgiving loans made to the company. Sekisui House Ltd. (1928), a home builder, plunged 5.5 percent after announcing a plan to sell convertible bonds.

The Topix index dropped 0.4 percent to 809 at the 11:00 a.m. trading break in Tokyo, erasing gains of as much as 0.3 percent. The Nikkei 225 Stock Average was little changed at 9,410.68, after swinging between gains and losses at least nine times.

“As long as the Greece’s debt crisis isn’t taken care of investors are going to be very cautious,”Naoki Fujiwara, who helps oversee $6 billion in Tokyo at Shinkin Asset Management Co. “People are worried Greece’s problems will spread to neighboring countries. If that happens, it will weigh heavily on stocks.”

The Nikkei is heading for a 1.2 percent decline this week, the biggest weekly drop since May 13, amid concern faltering U.S. economic growth and Greece’s worsening sovereign debt crisis will derail the global economic recovery. The Topix index is set for a 1 percent fall.

Greenspan said in an interview yesterday with Charlie Rose in New York that a default by Greece is “almost certain” and that could help drive the U.S. economy into recession. www.bloomberg.com

Gold May Rise as Slowing U.S. Economy, Weaker Dollar Fuel Investor Demand

Gold may gain for a third day in New York as concern about Europe’s debt crisis, signs that the U.S. economy is slowing and a weakening dollar spurs demand for the metal as an alternative investment. Palladium climbed.

U.S. payrolls grew at the slowest pace in eight months in May and manufacturing expanded at its slowest pace in more than a year, reports showed last week. The European Union needs to reach an accord on Greece’s debts before finance ministers meet on June 20, EU Economic and Monetary Affairs Commissioner Olli Rehn said yesterday. The dollar slid to a one-month low against six currencies. Gold typically moves counter to the greenback.

“Speculation U.S. economic growth is losing pace and the Greek debt crisis is worsening” is supporting gold, John Meyer, an analyst at Fairfax IS in London, wrote in a report today. “The dollar is off this morning, helping support prices as they push toward the record.”

Gold for August delivery fell 40 cents to $1,546.80 an ounce by 7:59 a.m. on the Comex in New York. It yesterday reached $1,555, the highest price since May 2. Immediate- delivery gold was 0.1 percent higher at $1,546.05 in London.

Concern about faster inflation, Europe’s debt crisis, a weakening dollar and fighting in Libya boosted gold to a record $1,577.40 on May 2. Prices are up 8.8 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London. Federal Reserve Chairman Ben S. Bernanke is scheduled to speak today at the International Monetary Conference in Atlanta as the bank’s second round of bond buying, called quantitative easing or QE2, ends this month.

Debt Crisis

European Central Bank President Jean-Claude Trichet signaled for the first time he may support encouraging investors to buy new Greek bonds to replace maturing securities as officials seek to stem the nation’s debt crisis. ECB policy makers have opposed any measure that could be classed as a default to avoid what Rehn described yesterday as a “Lehman Brothers catastrophe.”

“The market’s still very sensitive to what’s happening in Greece and Europe, and at the same time sensitive to U.S. data,” Darren Heathcote, head of trading at Investec Bank (Australia) Ltd., said by phone. “There doesn’t seem to be many reasons to be selling gold at this present moment.”

Gold Fund

China Universal Asset Management Co. received approval from the nation’s financial-market regulator to start a fund that will invest holdings in overseas exchange-traded products backed by precious metals. Liu Ming, a spokesperson for China Universal, didn’t give details of when the fund would start raising money, nor how the extent of the holdings in each metal will be set.

“All the market participants we met with in China last week expect a slowdown in physical demand before buying picks up again in September,” Edel Tully, a London-based analyst at UBS AG said today in a report. While there may be “summer headwinds” for gold, “this would be viewed by most as a short- term correction within a bullish market. It’s very difficult to leaveAsia, and in particular China, without feeling bullish about gold.”

Silver for July delivery rose 1.4 percent to $37.285 an ounce in New York. Palladium for September delivery climbed as much as 1.6 percent to a three-month high of $811.80 an ounce and was last at $806. Platinum for July delivery was 0.1 percent higher at $1,823.40 an ounce. www.bloomberg.com