June 7 (Bloomberg) -- Japanese stocks gained, paced by trading companies and oil explorers, after Nikko Citigroup Ltd. raised its recommendation on Sumitomo Corp. and Marubeni Corp. shares and the price of crude oil advanced.
Limiting gains, technology-related companies that rely on U.S. sales such as Sony Corp. declined after a higher-than- forecast rise in U.S. labor costs fueled concern accelerating inflation will prompt the Federal Reserve to increase interest rates.
Mitsubishi Corp., Japan's largest trading house, rose to the highest since at least 1974. Takeda Pharmaceutical Co., the country's No.1 drugmaker, fell 1.8 percent after U.S. regulators said its Actos diabetes medication needs the strongest possible warning of the risk of heart failure.
Investors should continue to hold trading company shares ``because they will continue to lead the markets, helped by growth in overseas markets like Asia,'' said Takashi Kamiya, who oversees $16 billion at T&D Asset Management Co. in Tokyo. He added technology shares fell as ``the market reacted to the unit labor cost report in the U.S. as inflation there isn't slowing to the level the Fed is comfortable with.''
Indexes swung between gains and losses. The Nikkei 225 Stock Average added 12.45, or 0.1 percent, to 18,053.38 after falling as much as 1 percent. The broader Topix index gained 1.22, or 0.1 percent, to 1779.72 after sliding as much as 0.9 percent.
Mitsui O.S.K. Lines Ltd. led declines by shipping companies after Mizuho Securities Co. cut its recommendation on Mitsui O.S.K. and Kawasaki Kisen Kaisha Ltd.
Nikko Citi's Call
Mitsubishi Corp. rose 40 yen, or 1.2 percent, to 3,260, the highest since at least September 1974, the earliest that Bloomberg tracks the stock. Sumitomo Corp., which sells industrial fuel and provides auto leasing services, jumped 55 yen, or 2.3 percent, to 2,420. Marubeni, which trades in goods ranging from fuel to textiles, climbed 20 yen, or 2.1 percent, to 996.
Toshiyuki Johno, an analyst at Nikko Citigroup in Tokyo, raised his rating on both shares to ``buy'' from ``hold'' in a note to clients released yesterday after the close of trading. That brings his rating on Japan's five largest trading house to ``buy.''
Nikko Citigroup cited a bullish earnings outlook due to the growth of the companies' non-commodity related businesses as well as rising prices for raw materials.
Energy-related shares gained as oil prices rose, boosting earnings of oil explorers. Inpex, Japan's biggest oil producer, climbed 30,000 yen, or 2.6 percent, to 1.18 million. Its smaller rival AOC Holdings Inc. jumped 32 yen, or 1.8 percent, to 1,828.
Labor Costs Climb
Crude oil for July delivery recently rose 0.3 percent to $66.13 a barrel, after gaining 0.5 percent in New York yesterday.
Sony, the world's largest video-game maker, declined 80 yen, or 1.2 percent, to 6,790. Canon Inc., the world's largest digital camera maker, fell 50 yen, or 0.7 percent, to 7,100.
The U.S. was the largest overseas market for Sony and Canon made almost one third of its sales in North America last year.
The Standard & Poor's 500 index and the Dow Jones industrial Average dropped 1.4 percent and 1.5 percent respectively since the June 4 close, the largest two-day loss since March 13.
The U.S. government's measure of labor costs rose 1.8 percent last quarter, triple the rate initially estimated and higher than the 1.3 percent economists had expected in a Bloomberg News survey. The figure increased the odds companies will push up prices.
Federal Reserve Bank of Cleveland President Sandra Pianalto yesterday also joined Fed Chairman Ben S. Bernanke in warning that prices are rising too quickly.
Takeda, Shipping Lines
In Europe, the Dow Jones Stoxx 600 Index fell 1.7 percent, the biggest decline since March 14, after the central bank raised interest rates to 4 percent and suggested policy makers see room to lift them again.
Takeda dropped 150 yen, or 1.8 percent, to 8,190. U.S. regulators said yesterday Takeda's Actos diabetes drug should join GlaxoSmithKline Plc's Avandia in carrying the strongest possible warnings that people taking the pills risk heart failure. Takeda will add the more emphatic caution requested by the Food and Drug Administration for Actos, the company said yesterday in a statement released on PR Newswire.
The Topix Maritime Transport index fell 2 percent, the worst performer among the 33 industry groups included in the broad measure.
Mitsui O.S.K., Japan's second-largest shipping company by sales, declined 40 yen, or 2.3 percent, to 1,722. Kawasaki Kisen Kaisha Ltd., the country's third largest, lost 27 yen, or 1.7 percent, to 1,565.
Softbank, Fujitsu
Mitsui O.S.K.'s stock rating was reduced to ``hold'' from ``buy'' by Satoru Kunieda, an analyst at Mizuho Securities in Tokyo. He cut Kawasaki Kisen's recommendation to ``reduce'' from ``hold.''
Softbank Corp. jumped 70 yen, or 2.6 percent, to 2,795, reversing an earlier loss of as much as 0.9 percent after the owner of Japan's third-largest mobile-phone carrier by subscriber said it added more users than bigger rivals NTT DoCoMo Inc. and KDDI Corp. NTT DoCoMo fell 1000 yen, or 0.5 percent, to 199,000. KKDI declined 6,000 yen, or 0.6 percent, to 994,000.
Goodwill Group Inc., Japan's biggest employment services provider by market value, slid for a second day, losing 10,000 yen, or 14 percent, to 61,800 after the government barred the company's Comsn Co. unit from expanding its nursing-care business until 2011.
Goodwill said late yesterday it will sell Comsn to another subsidiary NSS Corp. in July. NSS had a net loss of 2.33 billion yen ($19 million) for its business year ended May 2006.
Fujitsu Ltd., Japan's biggest computer-service provider, dropped 27 yen, or 3.2 percent, to 820, after saying its unit inflated sales. Fujitsu's unit falsely boosted sales by 20 billion yen a year from December 2000 to January 2007, the Yomiuri newspaper reported earlier.
Nikkei futures expiring in June advanced 0.2 percent to 18,080 in Osaka and lost 0.1 percent to 18,020 in Singapore.
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