Stock Futures Little Changed After Greece Downgrade and Rising Oil Prices

Posted: Wednesday, February 22, 2012 7:59 AM EDT
By: Bruce Frey

First look... Stock futures traded almost flat this morning, with investors reluctant to press further gains a day after Dow industrials briefly topped the 13000 level for the first time since 2008. Futures erased modest gains, following European equities, after a preliminary composite purchasing managers index for the 17-nation euro zone unexpectedly showed business activity across the region contracted in February. Investors are also wary of fuel prices, fearing rising gasoline and other energy costs will crimp consumer spending as crude-oil futures topped $105 a barrel this week amid worries over Iran.

Most Asian markets ended higher on Wednesday, with Japanese stocks catching a tailwind from the yen's weakness, while mainland Chinese shares gained on hopes for a relaxation in policy toward the property sector. Stocks in Asia had slipped in early trading on doubts over the durability of the latest Greek rescue plan, but recovered as the day progressed. An increase in oil prices to a nine-month high weighed on Wall Street overnight, and also contributed to a poor start in the region. But the high prices lured buyers to the energy sector, with Inpex Corp. rising in Tokyo, while PetroChina gained in Hong Kong and in Shanghai. In Sydney, Woodside Petroleum rose, also supported by news that an LNG venture of the company was on track for a start-up in March. Japanese car makers and other exporters swung to gains as the dollar strengthened against the yen.

European stock markets dropped on Wednesday, as a gauge of business activity in the euro zone unexpectedly showed contraction in February and Fitch downgraded Greece’s credit rating. The broader banking sector was leading the charge south on Wednesday after data showed a surprise fall in private-sector activity in the euro zone. The preliminary Markit purchasing-managers index fell to 49.7 in February from 50.4 in January. Under 50 for that index indicates contraction. Economists had forecast a rise to 50.8. A flash estimate for the Germany composite output index signaled expansion, although at a slower pace than the seven-month high reached in January. Markets were also jittery after Fitch Ratings cut Greece’s credit rating to C from CCC and reiterated that a bond-swap agreement with private creditors would be a restricted default.

Early Tuesday, the euro-zone finance ministers approved a 130 billion euros ($172 billion) aid package in return for austerity measures and a bond swap that will see private bondholders take a write-down of 53.5% on their holdings.

Fifteen of the twenty four Asian/Pacific markets we watch are up. The India S&P CNX Nifty is down 1.82%. The China Shenzhen Composite is up 2.17%. Twenty seven of the twenty nine European markets we watch are down. The UK FTSE 250 is up 0.51%. The Greece FTSE/ATHEX 20 is down 4.81%. In pre-market trading Mosaic Company (MOS), Quanta Services, (PWR), Hess Corporation (HES), EOG Resources (EOG), and Corning Inc. (GLW) are up, while Dell (DELL), Toll Brothers (TOL), Netflix (NFLX), Citigroup (C), and Carnival Corporation (CCL) are down. [MarketIntelligenceCenter.com]