Commodities weaken; dollar gains after Russia signals confidence
MADRID (MarketWatch) -- U.S. stock futures were pointing to a weak open for Wall Street on Monday following weekend talk from global finance ministers of ending fiscal stimulus measures, while commodity prices fell and the dollar climbed.
S&P 500 futures fell 10.90 points to 929.80, Nasdaq 100 futures fell 14.25 points to 1,471.25 and futures on the Dow Jones Industrial Average fell 98 points.
Trading was listless on Friday, tracking what was seen for the entire week. On Friday, the Dow Jones Industrial Average (INDU 8,799, +28.34, +0.32%) gained 28 points, or to end at 8,799, while the S&P 500 Index (SPX 946.21, +1.32, +0.14%) rose 1 point and the Nasdaq Composite Index (COMP 1,853, -3.57, -0.19%) dipped 3 points.
Monday was setting out to be a weak day for U.S. markets. Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund, said investors are worried that the global economic recovery they've got in sight may lack all of its legs.
"The big picture is that we have an (economic) recovery but we don't have a solid (financial) system," said Di Mattia. "The recovery is in place (partly) because no (major) financial institutions have failed since September."
Di Mattia said many banks are still relatively fragile and another financial shock could derail a recovery in its very early stages.
In Europe and Asia, commodity prices and related stocks were weak while the dollar was stronger, with many pointing to the weekend Group of Eight finance minister meeting in Lecce, Italy as the culprit. Top finance ministers said they would look to end unprecedented monetary and fiscal stimulus that has brought the global economy close to stabilization after the credit crunch.
"The weekend meeting by the G8 and the focus on an 'exit strategy' is weighing on the futures this morning," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
At the same time, finance ministers also made reassuring noises on the sidelines about the U.S. dollar outlook, and its position as the global reserve currency.
Finance Minister Alexei Kudrin reportedly said Russia has confidence in the U.S. currency. Upbeat dollar comments deflated commodity prices, hitting markets across Europe and Asia. Crude-oil futures were down 95 cents to $71.09 a barrel, and gold was down $6 to $934.70 an ounce.
The head of the International Monetary Fund, Dominique Strauss-Kahn, however, urged caution over any move to reduce stimulus spending, saying that the global economy hasn't yet weathered the worst of the recession, according to a Reuters report.
The pan-Europe Dow Jones Stoxx 600 (ST:SXXP 211.21, -3.14, -1.46%) fell 1.3%, and Japan's Nikkei 225 fell nearly 1%. The dollar, meanwhile, was up 1.1% against the euro at $1.3860 and steady against the yen at 98.30 yen. The 10-year Treasury bond yield fell 4 basis points to 3.75%.
On the data front, the Empire state index for June will be released at 8:30 a.m. Eastern, while the NAHB home builders' index is out at 1 p.m. Eastern.
Among stocks in focus, Cemex (CX 11.34, +0.40, +3.66%) said it was selling its Australian unit to Holcim for A$2.02 billion ($1.6 billion).
From the Paris Air Show, United Technologies (UTX 55.84, +0.29, +0.52%) said in a meeting with investors on Monday that President and Chief Executive Louis Chenevert and Senior Vice President and Chief Financial Officer Greg Hayes will affirm that in 2009, the company expects to earn between $4 to $4.50 a share on revenue of about $55 billion.
Also in Paris, Boeing's (BA 51.44, +0.78, +1.54%) commercial airplane chief executive said he expects capital to become more available to airlines by the end of year, which will help in financing the new aircraft. He added that Boeing doesn't see more commercial production cuts.
In the financial sector, insurer Lincoln Financial Group (LNC 17.75, -1.20, -6.33%) announced a $2 billion capital raising plan, including the sale of $600 million of common stock, $500 million of senior debt and $950 million in preferred stock under the Treasury's Capital Purchase Program.
