US stocks seen lower as budget fight weighs
U.S. stock index futures pointed to a lower open on Friday, with shares in Europe and Asia trading anemically as U.S. budget talks weighed on global markets.
Budget spending must be agreed by Congress before October 1, next Tuesday, to prevent a government shutdown which could involve federal employees facing unpaid temporary leave and a delay in the payment of military personnel. Most analysts expect a deal to be reached, even if it is at the last minute, since lawmakers are unlikely to want to risk any fallout at the 2014 Congressional elections.
The Senate will vote on Friday on a stop-gap spending bill which will exclude the healthcare defunding provision that was passed in the House of Representatives, which will essentially mean the bill going back to the House in its changed format for further consideration.
"A shutdown of a few days would probably have little impact (although perhaps no non-farm payrolls report next Friday!) but of course the longer the shutdown the more negative it becomes. For sure, the uncertainty and the debt ceiling aspect is probably already causing delays to business decisions. Given the perception in the U.S. that the Republicans are more to blame for congressional gridlock we expect them to blink first," said Bank of Tokyo-Mitsubishi's Derek Halpenny in a research note.
CNBC's Maria Bartiromo spoke with Canadian Prime Minister Stephen Harper about the fate of BlackBerry. Ben Parr, CNET columnist, is skeptical of Fairfax's deal for BlackBerry, and John Spallanzani, GFI Group says, "it would be a black eye for Canada if BlackBerry goes down."
The pullback came after gains in the U.S. overnight. Major benchmarks managed to snap a five-day losing streak, with sentiment boosted by positive economic data and reassurances from Republicans that they would not cause the government to shut down over the debt battle.
Meanwhile, the debt ceiling must also be extended to allow the Treasury to continue borrowing money and honor its debt repayments.
Reuters reported on Wednesday that Senior Republican Jeff Sessions said there would be no shutdown or government default. House speaker John Boehner said a Republican proposal was coming that would tie federal government spending cuts to a U.S. debt limit increase.
Friday should be a relatively quiet end to the week on the data front, with the release of August personal income and spending figures, as well as the final reading of the University of Michigan's consumer sentiment survey for September.
In the bond markets, the Fed is due to purchase $4.75-5.75 billion of 5-6-year notes. Yields on benchmark 10-year Treasuries stood at around 2.65 percent early on Friday.
Companies reporting quarterly earnings include Blackberry, which will post numbers before Wall Street opens. This week, the Canadian tech giant announced it would be taken private by Toronto-based insurer Fairfax for roughly $9 a share.
Analysts polled by Reuters forecast Blackberry will post a loss per share of $0.16 on revenue of $3.1 billion, versus a loss of $0.99 on revenue of $2.8 billion the year before.
By CNBC's Katy Barnato