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from Bloomberg:
May 25 (Bloomberg) -- U.S. stock futures fell, indicating the Standard & Poor’s 500 Index may slip to 2010’s lowest level, as bank borrowing costs rose and a report said North Korean leader Kim Jong Il ordered his military to prepare for combat.
Goldman Sachs Group Inc. lost 1.8 percent as the rate banks say they pay for three-month loans in dollars increased to 0.536 percent, the highest since July 7, according to the British Bankers’ Association. Ford Motor Co. and Apple Inc. fell more than 2.5 percent on concern that Spain’s ailing banks signal a widening Europe debt crisis that may curb global growth.
S&P 500 futures expiring in June dropped 2.5 percent to 1,044.40 at 7:50 a.m. in New York. The index’s lowest close of the year was 1,056.74 on Feb. 8. Dow Jones Industrial Average futures retreated 210 points, or 2.1 percent, to 9,833.
“The troubles that we have are big enough to keep this downtrend going for quite some time,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels. “Everybody realizes this is going to put severe stress on economic growth. Tension between South and North Korea is another additional negative that is spooking markets.”
The S&P 500 lost 12 percent from a 19-month high on April 23 amid concern mounting budget deficits in European countries will derail global growth. Four Spanish banks said they will combine as regulators push lenders to merge with stronger partners and after the International Monetary Fund yesterday urged the nation to take more steps to overhaul its financial institutions.
Bank of England
The worsening European debt crisis “may limit the pace of the global recovery,” Adam Posen, a member of the Bank of England’s Monetary Policy Committee said in a speech yesterday.
Equities fell worldwide, driving the MSCI Asia Pacific Index down 3 percent, after the North Korea Intellectuals Solidarity group said that the country’s military was put on alert. The U.S. announced plans yesterday to conduct anti- submarine exercises with South Korea following the March 26 torpedoing of a warship.
Home prices and consumer confidence probably improved, climbing further from the depths reached during the worst recession since the 1930s, economists said before reports today.
The S&P/Case-Shiller index of property values in 20 cities rose 2.5 percent in March from a year earlier, the best performance since 2006, according to the median forecast of 26 economists surveyed by Bloomberg News. Signs the economy is beginning to create jobs may have lifted Americans’ spirits in May for a third consecutive month, another report may show.
Credit Risks
Corporate and sovereign credit risk indicators jumped to the highest level in 10 months on concerns that heightened military tension in the Korean peninsula and a slump in confidence in the euro will hurt the global economy. The gap between the cost to buy and sell corporate credit reached the widest in nine months in another sign investors are increasingly wary of all but the safest government bonds amid Europe’s sovereign debt crisis.
“Economies with a lot of debt and high borrowing requirements have been forced by the bond markets to cut back their expenditures and reduce their deficits,” said John Haynes, the senior U.S. equity strategist at Rensburg Sheppards Plc in London. “Demand will be damaged in the back half of 2010 and into 2011 and that means earnings expectations have to come down and the world looks a slightly less sunny place,” he said in a Bloomberg Radio interview.
