Bloomberg News

U.S. Stock-Index Futures Drop on China Data; AIG Falls

September 10, 2012

U.S. stock futures declined, indicating the Standard & Poor’s 500 Index will pare last week’s gains, as trade data from China heightened concern the world’s second-largest economy is worsening.

American International Group Inc. (AIG:US) retreated 1.7 percent in early New York trading after the government offered to sell $18 billion of shares in the insurer. Tyco International Ltd. (TYC:US), the maker of fire-detection systems whose former executives were convicted of fraud, fell in Europe as JPMorgan Chase & Co. advised reducing holdings in the company.

S&P 500 futures expiring this month dropped 0.2 percent to 1,435.3 at 7:42 a.m. in New York. Contracts on the Dow Jones Industrial Average fell 22 points, or 0.2 percent, to 13,274 today.

The S&P 500 last week rose 2.2 percent, its best weekly performance in three months, as the European Central Bank approved a bond-buying plan and investors bet Federal Reserve Chairman Ben S. Bernanke will continue to support economic growth and help corporate profits. The equities index is about 8 percent away from its record closing high after climbing 14 percent this year.

“It’s a waiting game: will central bankers give what is needed and how weak will data be,” said Henrik Drusebjerg, a Copenhagen-based senior strategist at Nordea Bank AB, where he helps oversee $220 billion. “Equities are trading at fair levels, but I would demand some kind of discount given the current circumstances.”

Chinese Trade

Imports into China slid 2.6 percent in August from a year earlier, the customs bureau said. Economists in a Bloomberg survey had forecast growth of 3.5 percent. Exports rose 2.7 percent, slower than estimated. Industrial production increased 8.9 percent, the National Bureau of Statistics said yesterday.

“We could be much closer to the tipping point for more policy action as the slowdown in the external sector -- if it were to persist -- may bring more pressure on employment,” Morgan Stanley wrote in a report today.

AIG dropped 1.7 percent to $33.41 in early New York Trading. The Treasury is offering to sell $18 billion of AIG shares in a transaction that may cut taxpayers’ stake in the firm to below 50 percent for the first time since its 2008 bailout.

The insurer plans to buy back as much as $5 billion of the shares and Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are managing the sale, the Treasury said yesterday in a statement.

Record High

The S&P 500 has climbed to 13.9 times the expected earnings of its members, according to data compiled by Bloomberg. That’s the highest since February 2011 and almost matches the 14 average ratio since 2007.

U.S. stocks will surge 12 percent through the end of 2013, driving the S&P 500 to a record, as an improvement in capital investment and industrial production boost earnings, Citigroup Inc. strategists led by Tobias Levkovich wrote in a report dated Sept. 7.

“Attractive valuation, credit dynamics and implied earnings growth all support market appreciation even as sentiment is not as constructive,” Levkovich wrote in the report. Profits in the S&P 500 Index are expected to grow 11 percent in 2013, according to estimates compiled by Bloomberg.

Tyco declined 0.7 percent to $56.25 in Frankfurt. The stock has trebled since March 2009 as it split into three separate businesses.

“With outperformance and a significant multiple rerating driven by the breakup, we are moving to neutral” from a previous recommendation to buy the shares, JPMorgan analysts including Stephen Tusa in New York wrote in a report today.

Michael Kors declined 8.3 percent to $51.37. The high- fashion retailer said after markets closed last week that some of its investors will sell 20 million shares in a so-called secondary sale. Plains Exploration & Production Co. (PXP:US) rose 1.6 percent to $40.99 in Germany. The oil company said it agreed to buy BP Plc’s interests in certain deepwater Gulf of Mexico oil and natural-gas assets for $5.55 billion. The assets have production equivalent to 59,500 barrels of oil a day, according to a statement from Plains today.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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Companies Mentioned

  • AIG
    (American International Group Inc)
    • $54.93 USD
    • 0.23
    • 0.42%
  • TYC
    (Tyco International Ltd)
    • $45.09 USD
    • -0.21
    • -0.48%
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