Stock Futures Dive After Euro Fears Reignite

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Stock-index futures fell sharply on Tuesday, extending a global selloff, after Greece's prime minister called for a referendum on the embattled country's latest bailout package, rekindling anxiety that Europe is struggling to contain its debt crisis. 

Today's Markets

As of 9:00 a.m. ET, Dow Jones Industrial Average futures slid 227 points to 11,670, S&P 500 futures dropped 37 points to 1,111 and Nasdaq 100 futures fell 55.3 points to 2,300. 

The markets capped the best month in years on Monday, with the blue chips posting the biggest percentage gain since 2002 and the biggest point surge in history.  However, the last two sessions have represented a stark contrast as fears over the European debt crisis have once again crept back to the forefront. 

Greek Prime Minister George Papandreou unexpectedly called for a referendum of the country's bailout package after the closing bell on Monday.  Citizens would reportedly be asked to either approve or deny the bailout from various international lenders, which the beleaguered nation needs to stave off a default that analysts say could pressure much bigger European economies, like Italy. 

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The Greek public has vehemently, and sometimes violently, protested the austerity measures lenders have pushed for to cut the country's tremendous public debt load.  Indeed, a recent poll shows more than half of Greek voters are against the measures, according to The Wall Street Journal

"The latest developments increase the uncertainty around the euro area's response to the crisis," analysts at Nomura wrote in a note to clients. "If the referendum fails it might have wider repercussions, and not only in Greece given the general discontent at the peripheral austerity drive." 

European leaders, who are already facing strong political criticism for using public funds to support Greece, may be faced with a difficult decision if the referendum fails.  Analysts say they would have to either ease the bailout terms, or risk an almost certain default that would threaten the entire currency bloc, and potentially global economies.  

At the same time, if the terms of the bailout were lightened, it may signal to other countries seeking bailouts that such measures provide leverage in negotiations.

European blue chips plunged 5.8%, while the euro was off 1.6% against the U.S. dollar. The greenback jumped 1% against a basket of six world currencies. Euro zone banks, seen to have a particularly large exposure to sovereign debt, took a strong beating.  France's three biggest banks, Societe Generale, BNP Paribas and Credit Agricole, and Germany's Deutsche Bank were all off more than 10% in afternoon trading there.

Also concerning to the markets are fresh data showing the pace of manufacturing expansion in China -- Asia's biggest economy -- unexpectedly slowed down to a crawl in October from September.  

A private report slated for release later in the morning is forecast to show the U.S. manufacturing sector picked up steam in October.  Meanwhile, a separate report is anticipated to show construction spending ticked higher in September. 

On the corporate front, pharmaceutical giant Pfizer (PFE) posted quarterly earning and sales that came in well higher than analysts' estimates. 

Market participants were also paying close attention to the unfolding MF Global (MF) situation. The once powerful derivatives player filed for Chapter 11 bankruptcy protection on Monday after a soured bet on European sovereign debt sent investors and customers fleeing, according to several media reports. A last-ditch plan to sell the company fell through in the final hours after discrepancies were found in the New York-based companies books, with regard to customer money, according to a report by The Wall Street Journal

Energy and metals futures were sharply lower amid concerns over Chinese manufacturing, a rallying dollar and tracking broad selling in equity markets.  The benchmark U.S crude oil contract sunk $2.48, or 2.6%, to $90.73 a barrel.  Wholesale RBOB gasoline fell 4 cents, or 1.5%, to $2.64 a gallon. 

Gold slid $21.20, or 1.2%, to $1,704 a troy ounce.  Yields on U.S. government bonds fell as traders raced into the perceived safe-haven assets.  The benchmark 10-year Treasury note yielded 2.049% from 2.11%. 

Foreign Markets

European blue chips plunged 5.8% to 2,248, the English FTSE 100 slid 3.5% to 5,349 and the German DAX plummeted 5.8% to 5,785. 

In Asia, the Japanese Nikkei 225 slid 1.7% and the Chinese Hang Seng dipped 2.5% to 19,370. 

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