In the U.S.: Stock Futures Drop as BOE Fuels Concern

16 November 2011

Bank of England stokes the already- large flame that is the European debt crisis. Indicates possible need for another “round of stimulus.”

U.S. stock futures fell as the Bank of England said failure by European officials to resolve the debt crisis could hurt the global economy and results from Dell Inc. (DELL) and Abercrombie & Fitch Co. disappointed investors.

Dell Inc., the third-largest maker of personal computers, declined 2.5 percent after reporting sales that missed analysts’ estimates. Abercrombie & Fitch Co. slid 10 percent after the clothing retailer’s earnings trailed analysts’ projections. Research in Motion Ltd. (RIM)climbed 2.2 percent as Goldman Sachs Group Inc. upgraded the shares.

Futures contracts on the Standard & Poor’s 500 Index expiring next month lost 0.8 percent to 1,244.4 at 7:54 a.m. in New York, having earlier climbed as much as 0.4 percent. Dow Jones Industrial Average futures retreated 68 points, or 0.6 percent, to 11,970.

“The euro-zone debt crisis continues to plague the market,” said Kully Samra, who manages U.K.-based clients for Charles Schwab Corp., which has $1.5 trillion of client assets. “Although U.S. economic data has been steadily improving in the second half of the year, with most of the temporary factors from the first half fading, growth forecasts remain muted.”

Britain’s central bank indicated that policy makers might need to add to their current round of stimulus. The Bank of England is in the second month of a program of bond purchases aimed at shielding the U.K. economy from the fallout from Europe’s debt crisis.

UniCredit Report

UniCredit SpA Chief Executive Officer Federico Ghizzoni will ask theEuropean Central Bank to broaden the type of assets banks can use as collateral. Ghizzoni is among bankers meeting with the ECB inFrankfurt today. Ghizzoni’s remarks, originally reported by Corriere della Sera today, were confirmed by a spokesman.

A Federal Reserve report at 9:15 a.m. in Washington may show that U.S. industrial production climbed 0.4 percent in October, twice as much as the previous month, according to a Bloomberg News survey of economists. A separate release may show the cost of living was little changed, restrained by falling energy prices.

Stock futures earlier rose with Italian and Spanish government bonds after the ECB was said to buy the nations’ securities. The central bank bought larger-than-usual sizes and quantities of the Italian debt, said two people with knowledge of the trades, who declined to be identified because the deals are private. Central bank press officers couldn’t immediately be reached for comment by Bloomberg News.

The S&P 500 has struggled to make any headway this year amid concern that Europe’s debt crisis is spreading and U.S. economic growth is slowing.

Italian Government

Italian Prime Minister-designate Mario Monti will announce his new government today as he strives to convince investors he can trim Europe’s second-biggest debt and fend off contagion from the euro-area sovereign crisis. Monti, 68, began a meeting with President Giorgio Napolitano around 11 a.m. in Rome to accept the post officially and present his ministers.

John Paulson, the billionaire hedge-fund manager having his worst year, is cutting risk in hishedge funds further as the European crisis roils markets, according to two people briefed on the matter. The firm is reducing its bullish bets across all funds until there is more certainty in Europe, Paulson said at the Metropolitan Museum of Art in New York, part of a two-day annual meeting for investors.

Paulson’s Moves

The New York-based firm, which has $28 billion in assets, has cut the so-called net exposure in its main hedge funds to 30 percent, Paulson told investors on Nov. 14, according to the people, who asked not to be identified because the company is private. That number stood at 60 percent about four months ago.

Dell dropped 2.5 percent to $15.24 in early trading after sales missed estimates even as its focus on higher-margin technology boosted profit. Third-quarter revenue declined to $15.37 billion, Round Rock, Texas-based Dell said late yesterday. Analysts had projected $15.7 billion on average, according to Bloomberg data.

Abercrombie & Fitch lost 10 percent to $49.90. The company reported third-quarter profit of 57 cents a share. Analysts’ average estimate in a Bloomberg survey was 71 cents.

Research in Motion rose 2.2 percent to $19.56 in early U.S. trading after Goldman Sachs upgraded the maker of the BlackBerry to “neutral” from “sell,” citing the valuation on the stock.


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