Stock futures fall as China hikes bank reserves

[February 12, 2010]  NEW YORK (AP) -- Stock futures fell Friday after China said for the second time in a month it would force banks to increase their reserve levels.

Chinese regulators are trying to contain rapid economic growth to prevent speculative investment and real estate bubbles. The move comes a day after a tame inflation report brought relief that China wouldn't have to further tighten policy.

A similar action nearly a month ago by China spooked the market and began a sell-off that has seen major indexes fall for four straight weeks.

Major indexes were all up more than 1.1 percent through the first four days this week.

Concerns about debt problems in European countries like Greece, Spain and Portugal, as well as President Barack Obama's push for new regulations to restrict trading by large financial institutions have added to the market woes and increased volatility in recent weeks.

On Thursday, European Union leaders pledged to provide Greece with support as it tries to bring its debt problems under control. There has been concern that debt problems could spread throughout Europe and upend a global economic recovery.

Ahead of the opening bell, Dow Jones industrial average futures fell 65, or 0.6 percent, to 10,045. Standard & Poor's 500 index futures fell 7.90, or 0.7 percent, to 1,068.70, while Nasdaq 100 index futures fell 16.00, or 0.9 percent, to 1,759.50.

In the U.S., investors are awaiting a report on January retail sales. The report, which was delayed a day because major snowstorms shut down the federal government, is expected to show sales rose 0.3 percent last month, according to economists polled by Thomson Reuters.

Sales fell 0.3 percent in December. Strong retail sales are considered key to a sustained economic recovery because consumer spending accounts for more than two-thirds of all economic activity.

The Commerce Department releases the report at 8:30 a.m. EST.

Stocks rose Thursday following announcements that European leaders would help Greece with its debt problems. Details of a rescue package are expected next week.

An upbeat report on unemployment claims also bolstered the market. The Labor Department said first-time claims for unemployment benefits fell more than expected last week. High unemployment has been a major obstacle to creating sustained growth in the U.S.

The Dow Jones industrial average jumped 1.1 percent Thursday, while the Standard & Poor's 500 index rose 1 percent and the Nasdaq composite index gained 1.4 percent.

With investors pulling out of riskier assets like stocks and commodities Friday, safe-haven investments like the dollar and Treasury bonds rallied.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent from 3.73 percent late Thursday.

The dollar rose against other major currencies. Gold and oil both fell.

Overseas, Japan's Nikkei stock average rose 1.3 percent. Britain's FTSE 100 fell 0.5 percent, Germany's DAX index rose 0.1 percent, and France's CAC-40 fell 0.3 percent.

[Associated Press; By STEPHEN BERNARD]

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