Wall Street Futures Track Global Selloff On EU Worries
NEW YORK (Reuters) - Stock index futures fell sharply on Monday, tracking a selloff in global markets as Spain appeared closer to a sovereign bailout and fears grew that Greece may be approaching an exit of the euro zone.
The Spanish region of Murcia looked set to follow Valencia in tapping a government program to keep its finances afloat, while local media reported half a dozen regions were ready to do likewise.
Overseas stock and commodity markets fell steeply. European shares <.fteu3> lost 2 percent, led by euro zone banking stocks, a trend the United States looked set to follow as shares of Morgan Stanley
Greece also returned to the headlines. The country is in a "Great Depression" similar to America in the 1930s, the country's Prime Minister Antonis Samaras said, while the German magazine Der Spiegel cited high-ranking representatives in Brussels saying the IMF may not take part in any additional financing for the country.
"We have the Spanish problem very high on the surface here, their 10-year rates are now trading at 7.39 percent and you've got Greece rates starting to rise again," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
"Greece is beginning to come back into the headlines on top of Spain and that's what is causing the volatility; there are people out there who think we may be approaching the end game."
S&P 500 futures fell 16 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 145 points and Nasdaq 100 futures sank 32.25 points.
The euro slid 1 percent against the yen, hitting its lowest level in more than 11-1/2 years, pressured by fears that Spain may eventually need a full sovereign bailout.
Attention has again turned to the potential for a Greece exit of the euro zone. Alexander Dobrindt, a leading German conservative was quoted on Monday saying Greece should start paying half of its pensions and state salaries in drachmas as part of a gradual exit from the euro zone.
Events in Europe looked set to overshadow a slightly better-than-expected U.S. earnings season. As of Friday, with around a quarter of S&P 500 companies reporting, about 70 percent have beaten expectations.
Last week the S&P 500 hit its highest level in 2-1/2 months but weakness on Friday and again on Monday could send it down to around the 1,340 level, which some analysts have flagged as an area of support for the index.
U.S. prosecutors and European regulators are close to arresting individual traders and charging them with colluding to manipulate global benchmark interest rates, according to people familiar with a sweeping investigation into the rigging scandal.
(Reporting by Ed Krudy, Editing by Dave Zimmerman)
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