U.S. Futures Retreat After ECB Loans

By Rita Nazareth - Dec 21, 2011 8:08 PM GMT+0700

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Dec. 21 (Bloomberg) -- John Taylor, founder of currency-hedge fund FX Concepts LLC, talks about the European Central Bank's refinancing operations and the consequences for the euro. The ECB will lend euro-area banks a record amount for three years in its latest attempt to keep credit flowing to the economy during the sovereign debt crisis. Taylor, speaking with Sara Eisen on Bloomberg Television’s “InsideTrack,” also discusses the prospects for a U.S recession in 2012.(Source: Bloomberg)

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Dec. 21 (Bloomberg) -- Ellen Braitman summarizes the top stories this morning on the Bloomberg Business Report. (Source: Bloomberg)

U.S. stock futures erased earlier gains as optimism faded about the European Central Bank’s plan to lend euro-area banks a record amount for three years.

Oracle Corp. (ORCL) tumbled 10 percent after the second-largest software maker reported sales and profit that missed analysts’ projections. Research In Motion Ltd. (RIM) surged 8.3 percent on reports that Microsoft Corp. (MSFT) and Nokia Oyj were considering a joint bid and Amazon.com Inc. had made separate overtures to buy the BlackBerry maker.

Standard & Poor’s 500 Index futures expiring in March decreased 0.3 percent to 1,232.7 at 8:06 a.m. New York time. The benchmark gauge yesterday rallied 3.1 percent, its biggest gain of the month. Dow Jones Industrial Average futures lost 12 points, or 0.1 percent, to 12,019 today.

The ECB awarded 489 billion euros ($645 billion) in 1,134- day loans, the most ever in a single operation and more than economists’ median estimate of 293 billion euros in a Bloomberg News survey.

Benchmark gauges rose yesterday as better-than-estimated housing starts added to expectations the world’s largest economy will weather Europe’s debt crisis. Yesterday’s gain trimmed this year’s decline in the S&P 500 to 1.3 percent. The measure was still down 9 percent from this year’s high in April amid concern that Europe’s crisis may slow down the global economy.

RIM (RIMM) Surges

RIM surged 8.3 percent to $13.56. It “turned down takeover overtures” from Amazon because it wanted to fix its shortcomings independently, Reuters reported yesterday. That was followed by a Wall Street Journal article that said Microsoft and Nokia “flirted with the idea of making a joint bid” in recent months. Both cited unidentified people familiar with the matter.

Oracle tumbled 10 percent to $26.26. Business-software companies are taking longer to close deals as companies gird for slow economic growth in the U.S. and the possibility of a recession in Europe next year, said Rick Sherlund, an analyst at Nomura Holdings Inc.

The head of the world’s biggest bond fund said he sees a more than one in three chance that the euro zone will break apart and trigger a financial crisis akin to the one that devastated the global economy in 2008.

‘Sudden Stop’

“It would be the equivalent of a sudden stop” in which financial markets seized up, Mohamed El-Erian, chief executive officer of Pacific Investment Management Co. in Newport Beach, California, said. “It would be really, really messy.”

Anyone expecting the so-called January effect to turn shares of smaller U.S. companies into market leaders may end up waiting in vain, according to Steven G. DeSanctis, a strategist at Bank of America Merrill Lynch.

“We do not think we will see a January effect occur in the remainder of this month or next month,” DeSanctis wrote yesterday in a report.

Smaller companies have only kept pace with larger ones since the end of October. In past years, they rallied during the period in anticipation of further gains in January. Price swings linked to concern that the U.S. and European economies are faltering explain why the effect is unlikely to surface, according to DeSanctis, a small-cap stock specialist based in New York.

In January, small caps beat large caps 73 percent of the time since 1926, according to his analysis of figures from the University of Chicago’s Center for Research in Security Prices. The percentage is the highest for any month of the year. Small caps also had their best monthly performance in January, with an average gain of 4 percent, DeSanctis wrote.

To contact the reporter on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net