Futures look horrid right now
08:44 ET Internet Stock Indications : Group being pulled lower by anticipation of broad market retreat at the open: YHOO -1 1/2, AMZN -1, EBAY -1 1/4, CMGI -3 1/4, AOL -1 1/2, DCLK -5/8.
08:32 ET Market Indication : Broader market indicated lower, as U.S. 30-yr extends decline following report of stronger than expected Japanese GDP report. Current level of S&P futures suggests Dow retreat of approx. 45 points at the open.
Stocks Should Slide on Strong Japanese GDP
By Justin Lahart
Senior Writer
6/10/99 8:28 AM ET
Some good news for Japan is not very good news for U.S. markets today.
Defying economists' expectations of a sixth quarter of contraction, Japanese gross domestic product for the January to March period showed an increase of 1.9%. A leak of the report about an hour before the Tokyo close sent most Asian markets higher on hopes that a burgeoning recovery in the world's second-largest economy will help the region recapture its past strength.
But good news in Asia is one less reason for the Federal Open Market Committee to hold off on raising rates at its meeting at the end of the month. The argument that the Fed should stand pat until fragile Asian economies could fend for themselves just got a whole lot less convincing. Looking longer term, remember that one of the things that's kept down inflation has been slow (and occasionally negative) growth in Asia.
The Treasury market has sold off on the report, and stocks look set to follow. At 8:10 a.m. EDT, the 30-year was down 17/32 to 88 26/32, lifting the yield to 6.07%. The S&P 500 futures were off 8.8, nearly 10 below fair value and indicating a big drop at the open.
About an hour before the Tokyo close, the Nihon Keizai Shimbun issued a brief report that Japanese GDP had grown by 1.9%. Such reports from that paper are like Steve Lipin stories in The Wall Street Journal -- they are invariably true. The Nikkei, already faring pretty well on the sense that GDP would come in well, had a tremendous rally. The index rose 480.12, or 2.9%, to 17,102.62.
South Korea's Kospi soared 52.6, or 6.6%, to 856.06. Singapore's Straits Times rose 23.46, or 1.2%, to 2030.00. But Hong Kong, where a dollar-pegged economy makes U.S. interest rates matter a lot, saw some losses. The Hang Seng dropped 35.21 to 12,839.21.
European bourses were lower. In Frankfurt, the Dax was down 54.87, or 1%, to 5199.02. In Paris, the CAC was off 51.99, or 1.2%, to 4370.40.
The Bank of England cut its key rate by 0.25% to 5%, but it wasn't giving much of a boost to the market. Though labeled by many as a "surprise" easing, many in the market were expecting it -- witness the eight days of gains in stocks there. Choosing to concentrate on the U.S. rate outlook, London traders took the FTSE down 58.5 to 6394.5.
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