Europe is the drag on markets again this morning as data points to slowing in the fourth quarter as austerity takes its toll. Not much in the way of U.S. data today so the mood will be dictated by the slowing in Europe or confidence we can avoid getting dragged down.
U.S. stock futures fell Tuesday, undercut by worries over global growth prospects, while investors also eyed the outcome of Greece’s private-sector bond swap later this week.
Futures on the Dow Jones Industrial Average DJH2 -0.64% fell 93 points to 12,868.
Investors are moving to “slightly reappraise” their global growth estimates following some recent data disappointments and China’s decision on Monday to lower its 2012 growth target to 7.5% from the 8% level seen over the previous eight years, said Jim Reid, strategist at Deutsche Bank in London, in a note to clients.
Markets are also coming down from a “liquidity high” inspired by last week’s injection of 529.5 billion euros ($699.3 billion) of three-year liquidity into the euro-zone financial sector in the European Centra Bank’s Feb. 29 long-term refinancing operation, he said.
“So far this ongoing crisis has been about a battle between awful fundamentals and abundant liquidity,” he said. While the impact “of the latest round of liquidity will resonate around markets for a while, investors may start to be slowly concerned that the next round of liquidity may require something bad to happen again.”
Meanwhile, investors are also nervous ahead of the completion of the Greek bond swap, which is set to conclude on Thursday. A successful swap, which aims to cut more than €100 billion off of Greece’s debt load by effectively writing down the principal on privately held Greek bonds by 53.5%, is needed to ensure that Greece receives its second bailout and avoids a default later this month.
European equities extended a decline after Reuters reported that an IIF document warned that a disorderly Greek default could cause more than 1 trillion euros ($1.36 trillion) in damage to the euro zone, including €160 billion in bank recapitalization costs. An IIF spokesman didn’t immediately respond to a request for comment. Europe Markets
A collapse in household spending, exports and manufacturing sucked the life out of the euro zone’s economy in the final months of 2011, the EU said on Tuesday, showing the scope of the downturn that looks set to become a fully fledged recession.
Output in the 17 countries sharing the euro shrank 0.3 percent in October to December from the third quarter, the European Union’s statistics office Eurostat said, confirming an earlier estimate released last month.
European households, suffering from deep cuts in government spending and rising unemployment, reduced their spending by 0.4 percent, while government expenditure fell 0.2 percent in the fourth quarter. Imports into the euro zone fell 1.2 percent.
In a sign of the weak business confidence, industry ranging from manufacturing to mining slumped 2 percent in the period from the third quarter, as concerns about the currency area’s ability to honor its debts increased.
That intensity has subsided following the European Central Bank’s offer of a trillion euros in medium-term lending to banks and a political deal among most EU countries to commit to budget austerity, bringing Italian and Spanish bond yields to manageable levels.
Stocks to Watch
Nutrisystem Inc., VeriFone Systems Inc., Dick’s Sporting Goods Inc., Stage Stores and Vail Resorts Inc. are among the stocks that could be actively traded on Tuesday.
Shares of VeriFone rose 1.3% to $47.13 as the company reported fiscal first-quarter adjusted earnings of 58 cents a share, higher than the 52 cents a share expected by analysts polled by FactSet Research. Total revenue jumped 48% to $419.5 million from the year-ago period, above the $417.8 million expected by Wall Street.
Stage Stores Inc. is seen posting a profit of $1.06 a share in the fourth quarter, on sales of $468 million.
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