Stock futures slide as China aims to curb lending

[October 12, 2010]  NEW YORK (AP) -- Stock futures dropped Tuesday following reports that China is again forcing banks to hold more reserves to slow lending.

Traders also prepared for the Federal Reserve to release minutes from its September meeting Tuesday afternoon. The details of the meeting could provide clues about the central bank's widely expected plans to further stimulate the economy through bond purchases. A pair of earnings reports from Intel Corp. and CSX Corp. should provide further insight into the health of the economy when they are released after the closing bell.

China's reported move to curb lending in an effort to avoid speculative bubbles drove stocks down worldwide. Major European markets dropped and Asian indexes closed lower. Similar moves by China early this year also led to declines in global markets.

Strong economic growth in China has helped large international companies continue to grow even though the U.S. and many European economies remain sluggish after a deep recession. Cooling China's economy could further dampen global demand, which could hurt sales and profits for many companies.

Ahead of the opening bell, Dow Jones industrial average futures fell 56, or 0.5 percent, to 10,907. Standard & Poor's 500 index futures fell 6.90, or 0.6 percent, to 1,155.40, while Nasdaq 100 index futures fell 16.00, or 0.8 percent, to 2,009.50.

Stocks had been rallying in recent days amid growing expectations that the Fed will resume a program to buy Treasury bonds, which it also did during the recession. A move by the Fed could come as early as its next meeting, which ends Nov. 3. The Fed would further drive interest rates lower by buying bonds, which would also make stocks a more attractive alternative to bonds with low yields.

Bond prices rose, driving interest rates lower. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.35 percent from 2.39 percent late Friday. Bond markets were closed Monday for the Columbus Day holiday.

The yield on the 10-year note is often used as a benchmark to set interest rates on mortgages and other loans.

Overseas, Britain's FTSE 100 fell 0.8 percent, Germany's DAX index fell 0.5 percent, and France's CAC-40 slid 1.3 percent. Japan's Nikkei stock average fell 2.1 percent, while Hong Kong's Hang Seng fell 0.4 percent.

[Associated Press; By STEPHEN BERNARD]

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