Futures Drop as Europe Woos China

Investors await Chinese response to Europe's request to boost its bailout fund.

U.S. stock futures fell, indicating the Standard & Poor’s 500 Index may pare its biggest monthly rally since 1974, as investors awaited China’s response to the European request for money to boost the bailout fund.

Alcoa Inc., the largest U.S. aluminum producer, fell in early New York trading. Chevron Corp. slid after Bank of America Corp. cut its recommendation on the shares. JPMorgan Chase & Co., the biggest U.S. lender by assets, led declining shares in European trading.

Futures on the S&P 500 expiring in December fell 0.9 percent to 1,269.90 at 7:11 a.m. in New York. The S&P 500 advanced for the last four weeks and has climbed 14 percent this month. Futures on the Dow Jones Industrial Average retreated 84, or 0.7 percent, to 12,084 today.

“Investors are waiting for confirmation of help from emerging countries, notably China, regarding the bailout plan,” said Arnaud Scarpaci, a fund manager at Agilis Gestion SA in Paris, which oversees about $110 million. “There are also some who are locking in profits after last week’s gain.”

The Group of 20 leaders convene Nov. 3-4 in Cannes, France, a week after euro-area authorities pledged to magnify the capacity of their rescue fund to 1 trillion euros ($1.4 trillion) and look beyond their borders for help in doing so.

Stocks gained last week after the bailout fund was expanded and investors agreed to a voluntary writedown of 50 percent on Greek debt. The S&P 500 had fallen for five consecutive months through September, driven lower by concern the debt crisis would curb global growth. The measure has rebounded 17 percent from this year’s low on Oct.3. Better-than-estimated U.S. economic reports pushed the Citigroup Economic Surprise Index above zero for the first time since April.

“The initial euphoria over what appears to be a near-term solution in Europe is fading as investors now turn their attention to what all this means for long-term growth projections and asset-allocation decisions,” said Michael Gayed, chief investment strategist at Pension Partners LLC in New York.

French President Nicolas Sarkozy reached out last week to his Chinese counterpart Hu Jintao to build support for an enlarged rescue fund.

Equities have also climbed this month after the U.S. economy expanded in the third quarter at the fastest pace in a year, as gains in consumer spending and business investment helped support a recovery on the brink of faltering. Separate data showed that consumer confidence unexpectedly rose in October, while fewer Americans filed for unemployment assistance in the week ended Oct. 22.

About three quarters of the S&P 500 companies that reported earnings since Oct. 11 beat analysts’ projections, according to Bloomberg data. Earnings have surpassed estimates by an average 5.8 percent.

Alcoa slipped 2.4 percent to $11.29 in early New York trading. Chevron retreated 1.5 percent to $107.99. The stock was cut to “neutral” from “buy” at Bank of America. JPMorgan slid 1.5 percent to $36.16 in Germany.

 

Bloomberg

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