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Friday, February 12, 2010

Indications: Stock futures fall after China hikes reserve ratio

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By Polya Lesova, MarketWatch

FRANKFURT (MarketWatch) -- U.S. stock futures fell on Friday after China hiked its deposit-reserve ratio, escalating worries over global economic growth and prompting traders to sell stocks and commodities, and buy the U.S. dollar.

Futures on the Dow Jones Industrial Average dropped 67 points, or 0.7%, to 10,043.

S&P 500 futures fell 9 points, or 0.8%, to 1,067.60, and Nasdaq 100 futures declined 15.75 points, or 0.9%, to 1,759.70.

U.S. equities finished with strong gains on Thursday, after concerns about Greece's fiscal situation eased.

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The People's Bank of China announced Friday it will raise the ratio of reserves banks must set aside by 0.5 percentage points, marking the second such action this year.

The central bank has been tightening monetary policy in an attempt to restrain bank lending. Its moves, however, have raised worries over a potential slowdown in China's economic growth.

"The PBOC move risks eroding any stabilization emerging in global equities" following the European Union's pledge on Thursday to support Greece, said Ashraf Laidi, chief market strategist at CMC Markets.

The news from China sent the U.S. dollar sharply higher, while it also prompted traders to sell stocks and commodities such as oil and gold.

Oil futures fell nearly 2% to $73.84 a barrel, while gold futures dropped $15.70 to $1,079 an ounce. The concern is that slowing growth in China will lead to a decline in its appetite for commodities.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 80.63, +0.63, +0.79%) , which tracks the greenback against a basket of other major currencies, rose 0.7% to 80.583.

The euro declined 1% to $1.3553, adding to its losses. It had declined earlier after data showed that Germany's economic recovery stagnated in the fourth quarter of 2009.

The euro zone grew at a paltry 0.1% during the fourth quarter, as France's 0.6% expansion offset contractions in Italy and Spain and a stagnant performance in Germany. Economists had forecast 0.3% growth.

In the U.S., data on retail sales for January is due at 8:30 a.m. Eastern time followed by inventories for December and consumer sentiment for February at 10 a.m. Eastern time.

The U.S. Energy Information Administration will also release delayed data on petroleum and natural-gas inventories.

Quarterly results from Duke Energy Corp. /quotes/comstock/13*!duk/quotes/nls/duk (DUK 16.21, -0.01, -0.06%) and Ingersoll-Rand Plc /quotes/comstock/13*!ir/quotes/nls/ir (IR 33.98, +0.59, +1.77%) will be released before the opening bell.

Motorola Inc. /quotes/comstock/13*!mot/quotes/nls/mot (MOT 6.65, +0.02, +0.30%) will likely be in focus after it said late Thursday that it plans to split itself up into two separate companies.

In Europe, German steel maker ThyssenKrupp AG /quotes/comstock/11e!ftka (DE:TKA 22.99, +0.42, +1.84%) reported a 2% drop in fiscal first-quarter profit, but its result beat market expectations.

Polya Lesova is reporter for MarketWatch, based in Frankfurt.


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