Indications: Stock index futures turn lower ahead of payrolls

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By William L. Watts, MarketWatch

LONDON (MarketWatch) -- U.S. stock index futures declined Friday as the euro dropped, but upcoming employment figures, which are expected to show the largest jump in nonfarm payrolls in 27 years, remain likely to set the tone, analysts said.

"Wall Street managed to eke out a positive finish yesterday but it's arguably going to be a case of waiting for the nonfarm payrolls report before European and U.S. equity markets can decide which way to end the week," said Ben Potter, research analyst at IG Markets.

S&P 500 futures fell 8.1 points to 1,095.50 and Nasdaq 100 futures lost 15.75 points to 1,882.00.

Futures on the Dow Jones Industrial Average dropped 71 points to 10,187

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Economists surveyed by MarketWatch are looking for a jump of 540,000 in nonfarm payrolls in May, including around 415,000 Census workers. The report, which is due at 8:30 a.m. Eastern time, comes as investors are looking for signs the U.S. economic recovery can sustain itself.

Excluding the temporary hires made by the government to conduct the Census, payrolls are expected to be up by around 125,000. Nonfarm payrolls excluding Census workers rose by 223,000 in April. Read about expectations for the payrolls report.

"Last month, markets simply ignored the strong payrolls report as the figures were overshadowed by extreme tensions in [euro-zone] bond markets ahead of the G-7 meeting. We believe, however, that markets might pay more attention to this month's figures and if the payrolls show an upward surprise, equities might get a boost," said analysts at KBC Bank in Brussels.

In currencies, meanwhile, the euro /quotes/comstock/21o!x:seurusd (CUR_EURUSD 1.2045, -0.0116, -0.9539%) slumped to the latest in a string of four-year lows against the dollar, retreating below $1.2110, while also plunging to an all-time low below Swiss 1.3900 francs. The dollar /quotes/comstock/21o!x:susdjpy (CUR_USDYEN 92.0500, -0.5300, -0.5725%) was unchanged against the Japanese currency at 92.58 yen.

Concerns about sovereign debt were on the rise after a spokesman for the Hungarian prime minister was quoted as saying that the nation's economy was in a "grave" situation and that the budget was in worse condition than had been described by the previous government.

European stocks turned lower, in line with the jitters over Hungary.

Hurricanes May Lift Oil Prices Further

An increasingly bullish picture is emerging for crude oil prices ahead of the U.S. hurricane season, which a top weather agency warns could be the most intense since 2005 and may hamper BP's efforts to contain the Macondo spill.

BP /quotes/comstock/23s!a:bp. (UK:BP. 440.45, +8.20, +1.90%) /quotes/comstock/13*!bp/quotes/nls/bp (BP 39.27, +1.61, +4.28%) remained in the spotlight: Shares of the oil giant rose more than 3% in London following reports the company had placed a cap over the leak responsible for the disastrous oil spill in the Gulf of Mexico. It remains unclear, however, how successful the latest effort will be in stemming the flow of oil that's fouled sections of the Louisiana shoreline and threatened beaches on Florida's panhandle. Read about efforts to plug the leak. Read London Markets.

"Certainly the news of progress in stemming the flow can only be seen as positive, not least against the backdrop of news that the White House has sent its first invoice to the company to cover cleanup costs," Potter said.

In energy trading, crude-oil futures fell 40 cents to $74.21 a barrel.

Also making headlines Friday, McDonald's Corp. /quotes/comstock/13*!mcd/quotes/nls/mcd (MCD 67.85, +0.08, +0.12%) plans to recall 12 million U.S.-made collectible drinking glasses themed on the movie character Shrek because the painted design on the glasses contains cadmium, news reports said.

U.S. stocks posted a small rise Thursday, with gains led by the energy and technology sectors.

The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,255, +5.74, +0.06%) ended 5.74 points higher at 10,255.28. The S&P 500 index /quotes/comstock/21z!i1:in\x (SPX 1,103, +4.45, +0.41%) rose 4.45 points to end at 1,102.83, while the Nasdaq Composite Index /quotes/comstock/10y!i:comp (COMP 2,303, +21.96, +0.96%) outpaced the other benchmarks, finishing up 21.96 points at 2,303.03.

William L. Watts is a reporter for MarketWatch in London.