U.S. Index Futures Drop as Dollar Weakens Before Data; Italian Bonds Fall

By Rob Verdonck - Dec 27, 2011 7:31 PM GMT+0700

U.S. equity index futures fell, the dollar weakened and European stocks erased gains before reports that may show house prices in U.S. cities dropped at a slower pace and consumer confidence climbed. Italian government bonds declined as the nation prepares to sell debt this week.

U.S. equity futures fell 0.2 percent at 12:26 p.m. in London. The Dollar Index declined 0.1 percent. The Stoxx Europe 600 Index was little changed after gaining as much as 0.3 percent. Italian 10-year bond yields climbed six basis points to 7.04 percent. Copper futures retreated 1 percent.

Data today may show home prices in 20 U.S. cities fell at a slower pace and consumer sentiment improved. The world economy is in danger because of Europe’s debt crisis, said International Monetary Fund Managing Director Christine Lagarde. Italy will sell 9 billion euros ($12 billion) of 179-day bills and as much as 2.5 billion euros of zero-coupon 2013 bonds tomorrow.

“After the Christmas holidays, market participants are focused on the consumer confidence index and Case-Shiller,” said Andreas Lipkow, an equity trader at MWB Fairtrade Wertpapierhandelsbank AG in Frankfurt. “The unemployment data in the next days are more important for the market because it shows how strong the U.S. economy really is.”

The Stoxx 600 fell less than 0.1 percent, taking this year’s drop to 12 percent. Banco Comercial Portugues SA and Banco Espirito Santo SA, Portugal’s biggest lenders, rallied more than 3 percent as Jornal de Negocios said the government may recapitalize the country’s banks without becoming a shareholder.

DAX, CAC

Germany’s DAX Index climbed 0.2 percent and France’s CAC 40 gained 0.2 percent. U.K. markets remain shut today.

The declines in European shares this year compare with an 18 percent drop in the MSCI Asia Pacific and a 0.6 percent gain on the Standard & Poor’s 500 Index. The U.S. equity gauge added 0.9 percent on Dec. 23 after data last week on durable goods, jobless claims and the housing market added to signs the world’s largest economy is recovering.

Property values probably declined 3.2 percent in October from the same month in 2010, the smallest year-over-year drop since January, according to the median forecast of 20 economists before a report from S&P/Case-Shiller today. Consumer confidence may have climbed to a five-month high of 58.6 in December from 56 last month, a separate survey showed before the New York- based Conference Board’s report. The Labor Department will release data on initial claims for jobless benefits on Dec. 29.

Treasury 10-year yields were unchanged at 2.03 percent. German 10-year yields fell three basis point to 1.93 percent. A basis point is 0.01 percentage point.

Europe Debt Crisis

Europe has made progress in tackling the crisis but needs to speed up the implementation of measures to fight it, Lagarde said in the Journal de Dimanche on Dec. 25. The U.S. is already being affected and growth forecasts for China, Brazil and Russia are also being lowered, she said, according to the report.

The euro traded at $1.3063 from $1.3061. In addition to tomorrow’s sales, Italy will also auction debt due in 2014, 2018, 2021 and 2022 later this week. The nation’s 10-year yields rose today beyond the 7 percent level that spurred Greece, Ireland and Portugal to seek bailouts.

Copper for March delivery fell as much as 3 percent to $3.365 a pound before trading at $3.434 on the Comex in New York. Futures gained 4.2 percent last week. Gold for immediate delivery dropped 0.8 percent to $1,593.68 an ounce and oil advanced 0.1 percent to $99.81 a barrel on the New York Mercantile Exchange.

To contact the reporters on this story: Rob Verdonck in London at rverdonck@bloomberg.net

To contact the editors responsible for this story: Stuart Wallace at swallace6@bloomberg.net; Nick Gentle at ngentle2@bloomberg.net