Markets remain in the doldrums

US stock-index futures declined, following markets in Europe and Asia lower, after analysts said Lehman Brothers Holdings Inc must unload more mortgage loans and speculation mounted that interest rates will rise.

Lehman, which said on Monday it lost $2.8 billion in the second quarter, fell on downgrades at Wachovia Corp and Credit Suisse Group.

Citigroup Inc, Bank of America Corp. and JPMorgan Chase & Co, the nation's largest banks, dropped after Fed chief Ben Bernanke said policy makers will "strongly resist" a surge in inflation expectations. General Motors Corp, the biggest US automaker, and AMR Corp declined as crude oil traded above $134 a barrel.

Standard & Poor's 500 Index futures expiring in June slipped 12.4, or 0.9 percent, to 1,351.1 as of 8:27 am in New York.

Dow Jones Industrial Average futures decreased 85 to 12,210 and NASDAQ-100 Index futures retreated 23.25 to 1,964.5. Europe's Dow Jones Stoxx 600 Index slid 0.5 percent.

"Interest-rate increases are never good for stock markets," Joerg de Vries-Hippen, who oversees about $26 billion as chief investment officer for European stocks at Allianz Global Investors in Frankfurt, said.

"The most important question at the moment is how inflation will develop."

Most US stocks slid yesterday, led by banks and technology companies, after speculation the Fed will raise borrowing costs overshadowed improving sales at McDonald's Corp and a rally in energy producers.

Futures trading showed an 12 percent chance of an increase in the Fed funds target rate to 2.25 percent at the central bank's next meeting, up from 6 percent in the previous session and no chance a week earlier.

Citigroup, the biggest US bank, lost 8 cents to $19.52, Bank of America retreated 8 cents to $29.53 and JPMorgan slipped 41 cents to $37.10.

Lehman decreased 41 cents to $28.86. The stock was cut to "neutral" from "outperform" by analysts at Credit Suisse.

Ford Motor Co, the second-biggest US-based automaker, fell 6 cents to $6.30. AMR, parent of American Airlines, lost 1 cent to $6.83 in Germany.

Caterpillar Inc, the biggest maker of earthmoving equipment, lost 35 cents to $80.46.

Texas Instruments Inc fell $1.09 to $30.24 in Germany.

The MSCI main world equity index dropped 1.15 percent to its lowest since mid-April.

Emerging sovereign spreads tightened 9 basis points while emerging stocks fell 1.9 percent.

Tokyo's Nikkei 225 index closed down 1.1 percent at 14,021.17 after dropping 2.1 percent on Monday, and the Philippines market tumbled 3.4 percent.

Agencies

(China Daily 06/11/2008 page17)