U.S. Stock-index futures tumble as italian bond yields surge
U.S. stock futures retreated, indicating the Standard & Poor’s 500 Index will erase two days of gains, as a jump in Italian bond yields signaled Europe’s debt crisis is worsening.
Adobe Systems Inc. tumbled 11 percent in Europe after the largest maker of graphic-design software cut its earnings target. Yahoo! Inc. gained 2 percent as Alibaba Group Holding Ltd. and Softbank Corp. were said to be talking with private- equity funds about making a bid for the company.
S&P 500 futures expiring in December lost 2.1 percent to 1,246.4 at 7:18 a.m. in New York. Contracts on the Dow Jones Industrial Average fell 201, or 1.7 percent, to 11,922.
“Italian bonds are within a very, very dangerous zone,” said Alberto Espelosin, head of analysis at investment company Ibercaja Gestion SGIIC SA in Zaragoza, Spain. “Any country paying more than 6.5 percent, it just boosts financing costs and makes it hard to reduce deficits. There is high risk aversion and equity markets will reflect this.”
The yield spread between benchmark Italian 10-year bonds and German bunds reached 500 basis points for the first time since the euro was introduced in 1999, while LCH.Clearnet Group Ltd. increased the extra deposit it demands from clients to trade Italian government bonds.
The Stoxx Europe 600 Index fell 1.7 percent today, erasing an earlier advance, as the 10-year Italian note yield topped 7 percent for the first time since 1997.
‘Need Time’
“The big question that hangs on markets is how do you bring down the debt level for countries like Italy,” said Russ Koesteric, San Francisco-based global chief investment officer for the IShares unit of BlackRock Inc. “These are countries that can reform, but the challenge is that they need time to do this.” BlackRock oversees $3.3 trillion.
The S&P 500 gained 1.2 percent yesterday as Italian Prime Minister Silvio Berlusconi’s offer to resign boosted optimism the nation will appoint a new leader who can implement austerity measures. The benchmark has climbed 16 percent since Oct. 3 amid speculation policy makers in Europe are stepping up the fight to tame the fiscal crisis.
October’s 11 percent rally in the S&P 500, the biggest monthly advance since 1991, failed to leave the gauge above its 200-day moving average, limiting the potential for a further advance, Zurich-based technical analysts at UBS AG wrote in a report yesterday.
Adobe, Yahoo
Adobe plunged 11 percent to $27.19 in European trading after the company said fiscal fourth-quarter net income will be 30 cents to 38 cents a share, compared with a previous forecast of 41 cents to 50 cents. Adobe will cut 750 jobs as it lessens its focus on older products and shifts investment to programs for digital publishing and Web advertising.
Yahoo advanced 2 percent to $16.29 in early New York trading. Alibaba and Softbank, in an effort to buy back stakes owned by Yahoo, have grown impatient with a lack of progress in direct talks with the company, said people with knowledge of the matter, who asked not to be named because the negotiations are private.
The Asian companies aim to work with partners that haven’t signed non-disclosure agreements circulated by Yahoo that can make it harder to bid for the whole company, the people said.
Activision Blizzard Inc. declined 2.2 percent to $13.63 even after the largest video-game publisher posted third-quarter profit that beat analysts’ estimates and raised its full-year forecast. Shares in the producer of “Call of Duty” have rallied 34 percent since Aug. 10.
STEC Inc. dropped 2.1 percent to $11.46. The maker of flash-memory drives forecast fourth-quarter revenue to be no more than $57 million, falling short of the average analyst estimate of $72.1 million in a Bloomberg survey.