U.S. stock index futures fell on Thursday, in the wake of weaker-than-expected growth data from Europe and Japan and a disappointing outlook from technology bellwether Cisco Systems Inc.
The French and German economies shrank more than expected in the fourth quarter of 2012, data showed, and a 0.6 per cent contraction in the euro zone was the steepest for the bloc since the first quarter of 2009.
Japan’s GDP shrank 0.1 per cent in the fourth quarter, crushing expectations of a modest return to growth and adding weight to the new government’s push for radical policy steps to revive growth.
The S&P 500 is up 6.6 per cent so far this year and trading has been thin over the past few sessions. Though weakness in Europe has persisted over recent quarters, the underwhelming GDP data, which could impact global growth and U.S. corporate profits, may trigger a round of profit-taking.
Shares of Cisco Systems fell 2 per cent in premarket trading a day after it reported a 5 per cent drop in revenue from Europe and its chief executive said business there remained challenging.
S&P 500 futures fell 6 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 fell 62 points, and Nasdaq 100 futures lost 11 points.
American Airlines and US Airways Group said they plan to merge in a deal that will form the world’s biggest air carrier, with an equity valuation of about $11-billion. US Airways shares edged up 0.6 per cent in premarket trading.
Nvidia shares fell 2.6 per cent in premarket trading after the chip maker’s revenue outlook missed expectations on Wednesday, pointing to a slowing PC industry and slower production of tablets using its chips. Shares of the world’s largest chip gear maker Applied Materials rose Wednesday after the closing bell following a better-than-expected earnings report and outlook.
Best Buy shares fell 3.5 per cent in premarket trading; sources said on Wednesday its founder, Richard Schulze, may scrap a buyout bid and instead, line up investors to take a minority position in the electronics retailer.
European shares fell, with data showing a deeper-than-expected euro zone recession and signals the ECB is reluctant to rein in the euro hurting sentiment. The euro zone economy shrank 0.6 per cent in the fourth quarter of 2012, knocking investor confidence in the region’s ability to recover this year.
With domestic demand weak, European companies have been looking abroad for profit growth, but that is now starting to be eroded by the strong euro exchange rate.
Any expectation of intervention from the European Central Bank were dampened on Thursday, when Vice President Vitor Constancio said exchange rates should be set by markets.
The EuroSTOXX 50 fell 0.9 per cent to 2,633.53 points by 1133 GMT, and technical charts pointed to more weakness.
The broader FTSEurofirst 300 was down 0.4 per cent at 1,161.19 points, giving up tentative early morning gains after the euro zone data and Constancio’s comments.
Heavyweight Nestle was the biggest drag on the pan-European index, after the food giant warned of a challenging year ahead, sending its shares down 2.5 per cent. Overall, though, Thursday’s crop of corporate reports had a positive tint, with international sales boosting bottom lines. Dutch staffing firm Randstad and Swiss engineering group ABB both beat earnings’ forecasts, helped by growth in Asia and Latin America. Shares in Randstad and ABB were both up nearly 5 per cent.
Asian stock markets finished mostly higher, ahead of a meeting this weekend of finance ministers of the Group of 20 major advanced and developing nations in Moscow. Japan’s Nikkei 225 index rose 0.5 per cent to close at 11,307.28, brushing aside data showing the Japanese economy shrank for a third straight quarter in the last three months of 2012. Investors believe the yen’s recent weakness will boost company earnings – and there will be more to come.
South Korea’s Kospi rose 0.2 per cent to 1,979.61. Australia’s S&P/ASX 300 advanced 0.7 per cent to 5,036.90 largely due to gains in the resource sector. Hong Kong’s Hang Seng added 0.9 per cent to 23,413.25 amid muted trading. Markets in Singapore and the Philippines fell while mainland China and Taiwan remained closed for Lunar New Year holidays.
Inside the Market editor Darcy Keith is away and will return next week.