Dow May Slip on Euro Worries
LONDON -- The futures market is suggesting the Dow Jones Industrial Average (INDEX: ^DJI) will open largely unchanged this morning, as the downside risk of the problems in the eurozone competes against forecast good news from the domestic economy.
Housing starts are expected to have risen from 654,000 in March to 690,000 in April, with the latest industrial production figures expected to be up by 0.7%.
However, the risk of Greece exiting the eurozone is now higher than ever following the country's failure to establish a coalition government, and these concerns may eventually weigh on the Dow. Anxiety over the potential fallout of a "Grexit" spooked Asian markets last night and caused sharp falls in European markets this morning. By lunchtime, the main European indexes had recovered some ground, but sentiment remained negative.
In Asia, the Nikkei closed 1.1% down, while the Hang Seng Index lost more than 3% in Wednesday's trading session. The FTSE 100 (INDEX: ^FTSE) had recovered slightly by lunchtime, finishing the morning down 0.8%. Leading the falls in London trading were miners such as Rio Tinto (NYS: RIO) and Xstrata, sold down due to fears that the fallout from a Greek exit could trigger a wider global slump.
European government bond yields also moved to reflect the new level of risk, with yields on Spanish 10-year bonds reaching 6.4% and Portuguese 10-year debt climbing to 11.7%. Even German government bonds fell slightly in price, but U.K. gilt bond prices rose slightly, reflecting perhaps the security of the U.K.'s independent currency.
In company news, shares of J.C. Penney fell by 13% in German trading this morning, and Arena Pharmaceuticals (NAS: ARNA) may also fall in early trade as investors digest the implications of its latest public offering.
However, General Motors Co (NYS: GM) gained 5.5%, also in Germany, after Berkshire Hathaway disclosed that it had acquired a 10 million-share stake in the automaker. Traditional companies such as GM have long been popular choices for billionaire investor Warren Buffett, who has also invested more than $1 billion in a leading British blue chip. The Berkshire CEO recently bought into a famous British name with global expansion potential -- and you can discover the identity of the company and the price he paid in this special free report.
Companies due to release quarterly earnings before the markets open this morning include Abercrombie & Fitch, Target, Deere, and Staples.
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