Indications: U.S. futures down on China rate worries

By Barbara Kollmeyer and Kate Gibson, MarketWatch

NEW YORK (MarketWatch) â€" U.S. stock futures and commodities declined Friday on thinking China was readying to hike interest rates to tame its rising economy and fight inflation.

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The Chinese government said Thursday the nation’s rate of inflation in October rose to a more than two-year high.

“Commodities are getting hit pretty hard with copper leading the way. The concern this morning is that the pick up in inflationary pressures in China... will lead the country to tighten monetary policy further while instructing banks to further reign in loans,” wrote Dan Greenhaus, chief economic strategist at Miller Tabak, in a note.

Futures for the Dow Jones Industrial Average /quotes/comstock/21b!f:dj\z10 (DJZ10 11,155, 0.00, 0.00%)   fell 43 points, or 0.4%, to 11,199, paring back from an earlier drop of more than 1%. Futures for the S&P 500 index /quotes/comstock/21m!f:sp\z10 (SPZ10 1,195, -15.70, -1.30%)  fell 6.7 points, or 0.6%, to 1,204.40.

Futures for the Nasdaq 100 /quotes/comstock/21m!f:nd\z10 (NDZ10 2,133, -38.75, -1.78%)   fell 11 points, or 0.5%, to 2,161.25.

In Asia, most stocks fell, with the Shanghai Composite index closing down 5.2%, its worst percentage fall in more than a year.

Chinese media reported Friday the country is readying new rules that will forbid foreign companies from buying property there and limit foreigners to purchasing just one residential unit for their own use.

Gold futures tumbled to below $1,400.00 an ounce while silver and copper also fell as investors concluded China â€" a big user of natural resources â€" was looking to cool off its economy. See story on Asia markets

“Equity markets are now geared up for a rise in interest rates in China,” said David Buik, strategist at BCG Partners. “This retrenchment followed in the wake of a dispiriting session in New York . . . thanks in the main to an adverse reaction to Cisco’s results.”

U.S. stocks finished lower on Thursday, dragged down by a weak forecast from Cisco Systems Inc. /quotes/comstock/15*!csco/quotes/nls/csco (CSCO 20.15, -0.37, -1.80%) . Those shares suffered the biggest 1-day drop in 16 years, and helped drag the Nasdaq Composite index /quotes/comstock/10y!i:comp (COMP 2,518, -37.31, -1.46%)  down 0.9%.

Merkel speaks on G-20

German Chancellor Angela Merkel speaks about growth, imbalances and protectionism.

Markets were also keeping a wary eye on the G-20 meeting in Seoul, South Korea, where leaders in a joint communique urged that markets be allowed to set foreign-exchange rates. See G-20 calls for market forex rates

On the domestic front, J.C. Penney Co. Inc. /quotes/comstock/13*!jcp/quotes/nls/jcp (JCP 31.13, -1.09, -3.38%)   on Friday reported its earnings almost doubled in the third quarter, with the department-store retailer also offering an upbeat profit forecast for the year-end period.

D.R. Horton Inc. /quotes/comstock/13*!dhi/quotes/nls/dhi (DHI 11.51, -0.66, -5.42%)   also reported results Friday, with the home builder reporting a smaller loss in its fiscal fourth quarter even as revenue and new orders fell.

Other stocks in focus for Friday include Walt Disney Co. /quotes/comstock/13*!dis/quotes/nls/dis (DIS 37.75, +1.82, +5.07%) , which reported a 7% profit decline on lower earnings at its ESPN cable channel, as well as in its theme parks, late Thursday.

Shares of Nvidia Corp. /quotes/comstock/15*!nvda/quotes/nls/nvda (NVDA 13.26, +0.65, +5.15%)  could also be a focus after posting a 21% profit drop after Wall Street closed.

Economic data on the schedule include the Reuters/University of Michigan consumer sentiment index for November, due at 10 a.m. Eastern time.

Europe stocks also were having a rough day, with worries over Irish debt compounding nervousness about fresh rate hikes from China.

Resource stocks were especially hard hit, with mining stocks down in London and oil stocks also under pressure with shares of Total /quotes/comstock/24s!e:fp (FR:FP 39.47, -0.23, -0.57%)  down 3.5% in Paris. See Europe Markets

Barbara Kollmeyer is an editor for MarketWatch in Madrid. Kate Gibson is a reporter for MarketWatch, based in New York.

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