MarketWatch.com - Pre-Market Indications

Wednesday, August 11, 2010

Indications: Stock futures fall sharply on economic worries

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By Polya Lesova, MarketWatch

FRANKFURT (MarketWatch) -- Wall Street trading looked set to open with sharp losses on Wednesday, as data from China and Japan once again thrust concerns over the pace of the global economic recovery to the forefront of investors' minds.

Oil prices fell below $80 a barrel, while gold gained and the dollar rallied against its major rivals. Most Asian stock markets ended lower and European equities posted broad-based losses in intraday trading.

Retailing giant Macy's Inc. /quotes/comstock/13*!m/quotes/nls/m (M 19.38, -0.38, -1.92%) is scheduled to report earnings before the market opens.

Fed takes fresh steps to spur growth

Futures on the Dow Jones Industrial Average dropped 111 points to 10,507 and S&P 500 futures fell 13.90 points to 1,105.80.

Nasdaq 100 futures declined 24.50 points, or 1.3%, to 1,872.

The Dow /quotes/comstock/10w!i:dji/delayed (DJIA 10,644, -54.50, -0.51%) fell 0.5% on Tuesday after the Federal Reserve warned that "the pace of economic recovery is likely to be more modest in the near term than had been anticipated."

To help support the recovery, the Fed said it will reinvest maturing mortgage-backed securities in longer-term Treasury securities in order to prevent its balance sheet from shrinking.

"With high unemployment, stunted income growth and tight credit still playing on investors' minds, the news drew an understated positive reaction," said Anthony Grech, head of research at IG Index.

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"The Fed's move still courts worries of a double-dip recession, as it had previously hoped to reduce the amount of money it put into the economy as the recovery gathered pace," he said in a note to clients.

In Japan, the Nikkei Stock Average ended down 2.7% after data on wholesale prices and machinery orders came in weaker than economists expected.

Investors also digested a string of economic reports from China -- including retail sales and industrial output -- that largely pointed to a cooling in the pace of the nation's economic growth.

The Shanghai Composite index finished up 0.5% after falling sharply in the previous session.

Shares of Walt Disney Co. /quotes/comstock/13*!dis/quotes/nls/dis (DIS 35.29, +0.13, +0.37%) will be in focus after the firm reported a 40% increase in fiscal third-quarter profit.

The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:SXXP 256.68, -3.25, -1.25%) fell 1%.

Food giant Nestle /quotes/comstock/06p!nesn (CH:NESN 51.60, +0.10, +0.19%) reported a 7.5% rise in first-half net profit and confirmed its full-year growth targets. Shares of Nestle gained 0.7% in Swiss trade.

In Germany, utility E.On AG /quotes/comstock/11e!feoan (DE:EOAN 23.33, -0.15, -0.62%) said its first-half net profit dropped 9%, but its adjusted earnings increased 11%. Shares of E.On edged down 0.3%.

In the financial sector, shares of ING Group /quotes/comstock/24s!e:inga (NL:INGA 7.60, +0.04, +0.48%) gained 0.7% after it reported a big rise in second-quarter net profit, which exceeded analyst estimates.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 81.63, +0.83, +1.03%) , which tracks the performance of the greenback against a basket of other major currencies, rose 1% to 81.576.

The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.3019, -0.0157, -1.1916%) fell 1.1% to $1.3034.

Polya Lesova is a reporter for MarketWatch, based in Frankfurt.

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