Japan's Commodities Shares Rise on Expectations of Fed Rate Cut

By Patrick Rial

Oct. 25 (Bloomberg) -- Japanese commodities-related shares such as Mitsui & Co. advanced on speculation the U.S. Federal Reserve will lower interest rates at its next meeting.

Mitsui & Co., the nation's second-biggest trading house, surged 3.4 percent. Lower interest rates will boost liquidity and many investors and strategists are predicting that the newly available money will be used to purchase commodities, bolstering prices.

Mizuho Financial Group Inc. led financial stocks lower after Merrill Lynch & Co. reported its biggest quarterly loss ever and U.S. existing home sales plunged, increasing concern the subprime crisis is worsening.

Mortgage defaults by people with poor credit histories have triggered a worldwide rout in debt and stock markets, spurring losses for investment banks and sending the U.S. housing market into recession.

The U.S. earnings and economic reports prompted speculation that the Federal Reserve will lower interest rates at its meeting next week to bolster the economy.

``As long as the U.S. is in turmoil, gains will be hard to come by over here,'' said Juichi Wako, a strategist at Nomura Securities Co. in Tokyo. ``We could see some support from the heightened rate cut expectations, but we've got to watch out for the stronger yen.''

The Topix index fell 6.54 point, or 0.4 percent, to 1,557.32 as of 9:19 a.m. in Tokyo. The Nikkei 225 Stock Average rose 28.74, or 0.2 percent, to 16,387.13.

Nikkei futures expiring in December rose 0.3 percent to 16,420 in Osaka and gained 0.2 percent to 16,415 in Singapore.

In other Asian markets open for trading, Australia's S&P/ASX 200 Index rose 0.2 percent and South Korea's Kospi index jumped 2.2 percent.