U.S. equity futures are indicating a lower open after failing to hold onto Monday's opening gains. Futures are taking cues from European and Asian trading, which saw broad-based weakness and volatility. The global markets are taking a collective breather as economic realities take center stage this week.Financials are moving lower in Europe after Fitch downgraded French bank BNP Paribas late yesterday. In addition, Standard & Poor's raised its estimates on loan losses for Spain's banking sector this morning. The move caused the euro and pound to move lower, pulling equities along with them.
There are a number of headline-making events upcoming, from Treasury Sec. Tim Geithner's testimony on the hill before the Congressional Oversight Panel on TARP to the FOMC announcement on Wednesday.
On the economic calendar today is May existing home sales at 10:00 a.m. ET. The Briefing.com consensus estimate is for 6.10 mln vs. the prior reading of 5.77 mln. Also out is the FHFA House Price Index for which the prior reading was 0.3%.
The bond market will be watching for the results from a $40 bln, 2-year note auction at 1:00 p.m. ET.
On the earnings front, Walgreens (WAG) posted a weaker than expected quarterly profit, missing estimates by $0.03.
The fortuitous announcement by the Chinese government that they were adopting a long-awaited flexible exchange rate policy sparked a global rally Monday. The reasoning was the de-pegging would allow the renminbi to appreciate, thus reducing trade tensions with the West, spurring foreign exports into the country, and reducing China's need for fiscal tightening. The latter has been an overhang on the markets for fears it would significantly slow growth, impeding the global economic recovery.
The reality is the move did little to alter the realities of an overburdened Western world struggling under mountains of debt and facing higher taxes and slower growth ahead.
Crude prices are coming off their best levels this morning, falling to $76.84 per barrel. Gasoline is holding at $2.127. Natural gas is attempting to hold close to the key $5/MMBtu threshold, currently trading at $4.780.Projections that the first storm of the Atlantic hurricane season may enter the Gulf of Mexico as soon as next week is putting more pressure on shares of BP (BP). The stock has lost over 47% year-to-date and trading at a forward P/E of 5x. The Energy sector has recovered from losses induced by the drilling moratorium.
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