U.S. stock index futures signaled a lower open on Friday, with the "sequester" of $85 billion of automatic spending cuts set to hit at midnight.
U.S. President Barack Obama will meet with Congressional leaders at the White House at 10 a.m. New York time to discuss ways to avoid sequestration striking, but hopes are low for a deal as Democrats and Republicans have so far failed to reach a compromise.
In an investor note on Thursday evening, Deutsche Bank's chief U.S. economist, Joseph LaVorgna, said the sequester could take 40 basis points off 2013 gross domestic product, "and possibly higher, depending on whether the fiscal multiplier is positive".
"However, we believe there is a good chance that sometime over the next few weeks, the Administration and Congress will water down these spending cuts," LaVorgna added.
"This will be the compromise necessary to extend the continuing resolution which funds the government, but expires on March 27."
Sequester fears weighed on European shares in early trade, with further downward pressure from weak euro zone manufacturing data, which showed activity continued to fall in February. In addition, Italy released data which showed unemployment in the country reached a 21-year high of 11.7 percent in January. Italy is also mired in political uncertainty after national elections on Sunday and Monday left no party with sufficient majority to govern.
In Asia, shares were pushed downwards by official manufacturing data for China that was below analysts' forecasts. The National Bureau of Statistics said the Purchasing Managers' Index (PMI) eased to 50.1 in February, down from January's 50.4. A reading above 50 indicates a sector expansion.
Later in the day, U.S. investors will eye personal income and spending data for January from the Bureau of Economic Analysis, due at 8:30 a.m. In a strategy note on Thursday afternoon, Paul Dales, U.S. economist at independent research firm Capital Economics, forecast spending slumped in January, due to the payroll tax hike and a fall back in dividend payments, while spending increased as households lowered their savings.
Analysts surveyed by market analysis website Briefing.com forecast income fell by 2.4 percent in January after rising 2.6 percent in December, while spending increased for a second consecutive month by 0.2 percent.
Meanwhile, the Institute for Supply Management's (ISM) non-manufacturing index, which tracks monthly changes in the services sector, is due out at 10 a.m. Economists polled by Briefing.com predict activity fell slightly in February from 53.1 to 52.4.
"The evidence from the regional surveys for the U.S. has been mixed," said Amna Asaf, North America economist at independent research firm Capital Economics, in a note on Thursday afternoon.
"While the Philly Fed index plunged further below zero in February, the Empire State index rebounded into positive territory. At face value, these two surveys point to a drop back in the ISM index to perhaps 51.0. But, the high level of the U.S. Markit PMI, which is a better gauge of national activity, suggests otherwise."
The University of Michigan Consumer Sentiment survey is due out at 9.55 a.m. The monthly index is a gauge of how consumers feel the economic environment will change. Economists polled by Briefing.com forecast it remained at 76.3 in February.
U.S. construction spending data for January will also be released at 10 a.m. on Friday. Economists polled by Briefing.com forecast spending rose by 0.5 percent in January against a 1.4 percent rise in December.
Data for domestic auto and truck sales in February will be out at 2 p.m. In January, 5.6 million autos were sold and 6.5 million trucks.
Friday will be a quiet day for U.S. earnings, with electricity provider Pepco posting fourth quarter results before the start of U.S. trade.
- By CNBC's Katy Barnato