Euro Debt Contagion Fears Send Stock Futures Sliding
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Stock-index futures fell on Wednesday as fears that Europe's debt crisis is beginning to strike countries far from the continent's highly-indebted periphery mounted and traders mulled multiple economic and corporate reports.
As of 9:18 a.m. ET, Dow Jones Industrial Average futures fell 76 points to 11,961, S&P 500 futures slid 11 points to 1,243 and Nasdaq 100 futures slipped 11 points to 2,349.
Evidence has been mounting that the European Union's debt crisis that was once confined to countries with enormous public debt like Greece may materially impact larger economies.
The Bank of England on Wednesday slashed its near-term growth forecast and inflation expectations, saying a failure of policymakers to reach an effective solution to the crisis will "certainly have significant implications for the U.K. economy." This comes a day after yields on debt of several European countries, like France, that retain top-notch credit ratings rose markedly as contagion fears have grown.
Contagion "is a real fear you have to face," Henk Potts, a wealth equity strategist at Barclays said in an interview with FOX Business, citing concerns that France may be the next focal point of the debt crisis.
Separately, German Chancellor Angela Merkel said Europe's economic powerhouse doesn't support euro bonds, or a common euro zone debt issuance. The sentiment was telegraphed previously, but it comes as yet another reminder of the dwindling options European policymakers have to stem the crisis.
In what was seen as a positive development, the difference between the German bund yield, Europe's safe-haven asset that is akin to U.S. Treasury notes, and other regional sovereign debt yields tightened somewhat on Wednesday.
Still, so-called sovereign debt spreads "remain at elevated levels, reflecting the skepticism about Europe’s ability to tackle the debt crisis," Gavan Noan, director of credit research at London-based Markit wrote in an e-mail.
European blue chips rose 0.53%, while the euro fell 0.35% to $1.349. Meanwhile, the benchmark 10-year U.S. Treasury note yields 2.031% from 2.049%.
On the U.S. front, retail giant Target (NYSE:TGT) posted third-quarter profits of $555 million, blowing past analysts' expectations, and also signaled its current-quarter earnings would be stronger than anticipated. Technology heavyweight Dell (NASDAQ:DELL), however, revealed better-than-expected earnings, but lacking sales that pushed shares down 2%.
Traders will also get a slew of data to parse through on the U.S. economy.
Inflation at the consumer level fell 0.1% in October from September -- the first fall since July as energy prices tumbled 2%. Excluding the more volatile food and energy component, prices were up 0.1% as expected. However, these data don't include a more recent rise in energy prices, which may push prices up in the next reading.
A separate report showed industrial output expanded at a rate of 0.7% in October from September, topping expectations of a 0.4% gain. Capacity utilization rose slightly to 77.8%, which was the highest reading since July 2008.
The Energy Department's weekly inventory reports are also on tap for Wednesday morning, which may lead to volatile trade in those markets.
The benchmark crude oil contract traded in New York fell 14 cents, or 0.14%, to $99.20 a barrel. Wholesale RBOB gasoline climbed 4 cents, or 1.5%, to $2.62 a gallon.
In metals, gold fell $5.90, or 0.31%, to $1776 a troy ounce.
European blue chips rose 0.53% to 2,266, the English FTSE 100 fell 0.13% to 5,510 and the German DAX slipped 0.24% to 5,919.
In Asia, the Japanese Nikkei 225 slid 0.92% to 8,463 and the Chinese Hang Seng plummeted 2% to 18,961.