By Rob Verdonck - Oct 17, 2011 7:53 PM GMT+0700
U.S. equity futures fell, while stocks in Europe and oil trimmed earlier gains and the euro weakened, as a German government spokesman damped expectations for a fast resolution to the sovereign-debt crisis and a report showed New York-area manufacturing shrank more than forecast.
Standard & Poor’s 500 Index futures dropped 0.2 percent at 8:50 a.m. in New York after earlier climbing as much as 0.9 percent. The Stoxx Europe 600 Index was up less than 0.1 percent, erasing most of a 1.5 percent gain. The euro weakened 0.7 percent against the dollar. The yield on 10-year Spanish bonds advanced for a sixth day, adding six basis points to 5.31 percent. Oil was up 0.2 percent at $87 a barrel in New York, reversing most of an earlier 1.6 percent advance.
Equities and the euro headed lower as Steffen Seibert, German Chancellor Angela Merkel’s chief spokesman, said European Union leaders won’t provide the quick ending to the debt crisis that global policy makers are pushing for at an Oct. 23 summit. Optimism that the region was developing a plan to shield banks from losses on sovereign debt helped send global stocks to the biggest weekly gain since July 2009 last week and gave the euro its best rally versus the dollar since March 2009.
“This may prove to be a somewhat monumental instance of buy the rumor and sell the fact,” said Richard McGuire, a senior fixed-income strategist at Rabobank International in London. “The continued promise of a sweeping solution is underpinning a cautious ‘risk-on’ tone.”
U.S. futures signaled the S&P 500 may fall after last week’s 6 percent jump, also the steepest increase since July 2009. Wells Fargo & Co. slipped 3.6 percent after per-share profit met estimates.
Earnings Season
Citigroup Inc. climbed 2 percent in early trading after reporting profit that rose 74 percent, beating analysts’ estimates following a $1.9 billion accounting gain that reduced the impact of falling trading and investment-banking revenue.
El Paso Corp. (EP) surged 28 percent as Kinder Morgan Inc. agreed to buy the company for $21.1 billion in a deal that would create the largest U.S. natural-gas pipeline network.
International Business Machines Corp. will report earnings after the close of trading.
The Federal Reserve Bank of New York’s general economic index rose to minus 8.5 from minus 8.8 in September. Economists projected an improvement to minus 4, based on the median of 53 forecasts in a Bloomberg News survey. Readings less than zero signal companies in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are cutting back.
A Federal Reserve report due at 9:15 a.m. New York time will show that industrial production expanded for a fifth straight month in September, according to the median estimate in a survey of economists.
European Stocks
About three stocks declined for every two that gained in the Stoxx Europe 600 Index, which retreated after gaining for three straight weeks. Automobile companies led losses, with Daimler AG and Bayerische Motoren Werke AG down more than 1.4 percent. BP Plc appreciated 4.6 percent after saying Anadarko Petroleum Corp. will pay $4 billion to settle all claims over last year’s oil spill in the Gulf of Mexico.
The yield on the Portuguese 10-year security rose 15 basis points to 11.80 percent, with seven days of losses in the bond driving the level up from 11.21 percent. The yield on the U.S. 30-year Treasury bond was little changed at 3.24 percent. The euro weakened to $1.3779, and was lower against 13 of its 16 most-traded peers.
Emerging Markets
The MSCI Emerging Markets Index increased 1.2 percent, on course for its ninth straight gain, the longest winning streak in 16 months. The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong climbed 2.8 percent and the Kospi Index (KOSPI) jumped 1.6 percent in Seoul. Korea’s won climbed 1.4 percent against the dollar.
South Korean Finance Minister Bahk Jae Wan said at the Paris meeting the Asian nation’s economy is performing better than expected, while data tomorrow may show China’s gross domestic product increased 9.3 percent in the third quarter from a year earlier, according to the median estimate of 22 economists surveyed by Bloomberg. That would be the ninth consecutive quarter of expansion above 9 percent.
The pound slipped 0.3 percent to $1.5768 as Ernst & Young LLP’s ITEM Club cut its U.K. growth forecast and said the Bank of England should lower its key interest rate as its new stimulus earlier this month is unlikely to be enough to revive economic growth.
To contact the reporter on this story: Rob Verdonck in London at rverdonck@bloomberg.net
To contact the editor responsible for this story: Mark Gilbert at magilbert@bloomberg.net
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