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Futures Up as Auction Soothes EU Fears

CNBC.com
Thursday, 17 Jun 2010 | 5:40 AM ET

Stock index futures rose Thursday after a successful bond auction in Spain helped quell fears about European debt contagion.

The market is awaiting reports on inflation and jobless claims and the Conference Board’s index of leading economic indicators, which will give investors a gauge of the outlook for growth in the United States.

Asian stock markets traded within a range on Thursday, after major indexes on Wall Street ended mostly flat on mixed economic data and a disappointing outlook from FedEx in the previous session. The Nikkei fell 0.7 percent to snap a five-session winning streak, coming off a one-month high.

Shares of BP jumped in London and edged higher before-hours in New York after the company agreed to set aside $20 billion in escrow for claims against the oil spill.

The oil giant could find the tally growing much faster in coming months if the United States Department of Justice files criminal charges against the company. Even misdemeanor convictions under environmental laws could produce large fines under general federal criminal statutes, which could inflate BP's total bill.

Bank of America-Merrill Lynch downgraded BP to neutral from buy on fears that the cleanup costs will make the company less competitive. Barclays Capital also cut BP to underweight on concerns over cleanup costs.

Analysts were divided, though, with Credit Suisse raising its view on the company and Citigroup saying BP can meet its financial obligations.

On Wednesday, British finance minister George Osborne made sweeping regulatory changes to the City of London, abolishing the Financial Services Authority watchdog and giving regulatory powers to the Bank of England to curb credit binges and prevent another crisis. The most controversial task for the Bank of England is deciding whether or not to break up big banks such as Barclays, Royal Bank of Scotland and HSBC, to avoid another “too big to fail” phenomenon from occurring, where large institutions are propped up at the expense of taxpayers.

But Marc Faber, author of the "The Gloom, Boom & Doom Report" told CNBC Thursday that governments have intervened too much in free marketssince the crisis started, to the point that they are affecting the health of the world economy.

Leaders of the 27 member states and the executive European Commission will meet on Thursday to discuss how to tighten financial regulationto help prevent another global economic crisis, including a "bank tax" levy to ensure banks pay for any future crises.

The economic data calendar on Thursday includes initial jobless claims and continuing claims, expected at 8:30 am New York time.

Economists surveyed by Briefing.com expect that claims for first-time unemployment benefit remained almost in line with the week prior, down 450,000 from 456,000, while continuing claims are expected to drop to 4.475 million from 4.462 million.

May’s consumer price index (CPI) will be announced at the same time, and is forecast as unchanged from last month's reading of down 0.1 percent. The CPI is the most widely cited inflation indicator. Consumer prices fell 0.1 percent in April after increasing 0.1 percent in March.

At 10 am, the Philadelphia Fed Business Outlook Survey for June will be released, with economists forecasting a slip to 20, from 21.4 in April. Last month, the Philly Fed index rose to its highest level since December 2009. But the details of the index did not indicate a strong and stable manufacturing sector.

Leading indicators for May will be announced at 10 am as well, with analysts calling for an increase of 0.5 percent. In April, the Conference Board's Leading Indicators Index turned negative for the first time since March 2009 as the index declined 0.1 percent.

The corporate earnings calendar includes the latest financial results for Actuant , Kroger, Smithfield Foods and Pier 1 Imports, all expected before the bell.

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ATU
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BP.
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KR
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PIR
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SF3
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