In the U.S.: U.S. Stock Futures Drop as Greece Searches for New Regime

8 May 2012

Contagion still a very real issue, as European discord dents U.S. investors’ confidence.

U.S. stock-index futures declined as Greek political leaders struggled to form a government, raising concern the Mediterranean nation may default on its debt as early as next month.

Electronic Arts Inc. (EA), the second-largest U.S. video-game publisher, fell 0.8 percent in earlyNew York trading after forecasting a loss wider than analysts estimated. Citigroup Inc. (C) the third-biggest U.S. retail bank, fell 0.8 percent as European lenders slipped.

Futures on the Standard & Poor’s 500 Index (SPX) expiring in June dropped 0.5 percent to 1,359.5 at 7:28 a.m. in New York. The benchmark equity gauge yesterday halted three days of declines, helped by a rally in bank shares after Warren Buffett said American lenders are in “fine shape.” Contracts on the Dow Jones Industrial Average lost 57 points, or 0.4 percent, to 12,902 today.

“Risk is on the rise in the euro area with political chaos right around the corner in Greece,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen. “The outcome of the French parliamentary election remains undecided just like the fate of Spanish banks. It is going to get tough in Europe and will have to get worse before it gets better.”

Francois Hollande, the president-elect in France, faces parliamentary elections in June.

Greek Default Risk

Alexis Tsipras, whose Syriza party placed second in Greek elections on May 6, received a mandate to form a government from President Karolos Papoulias today, after first party New Democracy gave up its bid.

Antonis Samaras, the leader of the New Democracy party in Greece, earlier said he failed to forge an agreement to form a government.

Greece once again faces the prospect of defaulting on its debt as its next government has 30 days to decide whether to make today’s interest payment on $250 million of 4.5 percent notes maturing in 2016. By May 15, officials must decide whether to pay the 436 million euros ($568 million) due on a floating- rate note issued a decade ago.

Electronic Arts dropped 0.8 percent to $15.01 in early U.S. trading. The company forecast a fiscal first-quarter loss of 40 to 45 cents a share, excluding items. Analysts on average had estimated a loss of 33 cents, according to data compiled by Bloomberg.

Citigroup declined 0.8 percent to $31.43 in New York trading before the official opening of the market as a gauge of European banks dropped.

Wynn, Rackspace

Wynn Resorts Ltd. (WYNN) declined 1.5 percent to $123.37 in Frankfurt trading as the casino company founded by billionaire Steve Wynn reported first-quarter earnings that fell 19 percent, missing analysts’ projections.

Rackspace Hosting Inc (RAX), the biggest competitor to Inc. in the market for Web-based data centers, dropped 11 percent to $51.38 in early New York-trading after reporting first-quarter profit of 17 cents a share, matching the average analyst estimate.

United States Steel Corp. (X) dropped 1.6 percent to $26.25 and Freeport-McMoRan Copper & Gold Inc., the biggest U.S. goldminer, slipped 1.2 percent to $35.97 in early New York trading as metal prices retreated on the London Metal Exchange.


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