Euro Worries Weigh on Stock Futures
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U.S. stock-index futures pointed to a lower open on Wall Street after plans from Italy's premier to resign reminded global trading desks of the perilous political environment in the eurozone.
Today's Markets
As of 7:55 a.m. ET, Dow Jones Industrial Average futures fell 26 points to 13117, S&P 500 futures dipped 3.5 points to 1413 and Nasdaq 100 futures slumped 6.5 points to 2630.
Italian Prime Minister Mario Monti revealed plans over the weekend to resign. While the timetable was not immediately established, he said if the fiscal budget for next year is passed quickly, he will resign immediately.
Monti, an expert in economics, was put into power last November after the resignation of Silvio Berlusconi with the mandate of fixing the eurozone's third-biggest economy and getting its fiscal house back in order. However, austerity measures there have been highly unpopular. Now, the move threatens to plunge the country back into political chaos and will almost certainly set the stage for early elections, analysts say. Indeed, Berlusconi has already thrown his hat into the ring.
"Irrespective of what we see in the next few days, political/electoral uncertainty coupled with campaign rhetoric and resultant headlines could yet see (bond) markets unsettled again," Alastair Newton, an analyst with Nomura wrote in a note to clients. "If markets do become unsettled over Italy we may see contagion into other eurozone economies, perhaps particularly Spain."
The yield on Italy's benchmark 10-year note jumped roughly 0.3-percentage point from Friday's close to 4.81%. Spain's 10-year yield climbed 0.2-percentage point to 5.62%. Both yields have fallen dramatically since September when the European Central Bank pledged to do whatever is necessary to keep borrowing costs for soaring uncontrollably as many market participants feared.
Market participants were also expected to pay close attention to budget talks in Washington, D.C. President Barack Obama and Speaker of the House of Representatives John Boehner met over the weekend for face-to-face talks. However, neither revealed the specific content. Boehner finds himself in a particularly tough position because he will need to convince disparate GOP caucuses in House to agree to any budget plan.
Elsewhere, AIG (NYSE:AIG) said it reached a deal to sell its airplane leasing business to a consortium of Chinese companies for $4.8 billion. Honeywell (NYSE:HON) unveiled plans to buy Intermec for $600 million. Ingersoll-Rand (NYSE:IR) said it will spin off its residential and commercial security businesses. It also said it is boosting its quarterly dividend by 31% and announced a new $2 billion share buyback program.
There were no major economic reports due on the day. However, traders are preparing for the Federal Reserve's meeting that begins on Tuesday and ends Wednesday. The central bank will not only provide its latest monetary policy statement, but will also provide fresh economic forecasts. Fed Chairman Ben Bernanke will also be holding a press conference that day.
Energy futures were to the upside. The benchmark crude oil contract climbed 65 cents, or 0.76%, to $86.58 a barrel. Wholesale New York Harbor gasoline jumped 1.3% to $2.631 a gallon. In metals, gold edged up by 0.49% to $1,714 a troy ounce.
Foreign Markets
The Euro Stoxx 50 sold off by 1.1% to 2574, the English FTSE 100 dipped 0.25% to 5900 and the German DAX slipped 0.54% to 7477.
In Asia, the Japanese Nikkei 225 ticked up by 0.07% to 9534 and the Chinese Hang Seng climbed 0.39% to 22277.