U.S. stock-index futures drifted lower Monday as investors looked to Europe once more with bewilderment, wondering if the new Prime Minister of Italy, Mario Monti can hold Italy together long enough to get its debt under control. The concern with Greece is still there and not going away anytime soon.
Futures on the Dow Jones Industrial Average fell 38 points to 12,074. Standard & Poor’s 500 Index futures lost 7.2 points to 1,254.40, while Nasdaq 100 futures fell 9.75 points to 2,340.50.
Investors in Europe are keeping a close eye on Italian-government-bond yields. Last week, the yield on 10-year bonds spiked above the crucial 7% level viewed as unsustainable amid political turmoil and a margin increase before drifting lower.
“Despite the initial optimism over the new Italian government, Italy’s debt auction was a mixed bag and economic data suggest the region is tipping into recession,” wrote economists at Bank of America Merrill Lynch as U.S. stock futures turned lower.
Italy’s parliament over the weekend approved additional austerity measures and economic reforms. Silvio Berlusconi formally resigned as prime minister, with Mario Monti tapped to head a new technocratic government.
On Monday morning, Italy sold 3 billion euros ($4 billion) of five-year Italian government bonds. The yield rose sharply to 6.29% from 5.32% in a sale last month, but the yield remained below the level seen in the secondary market ahead of the sale and attracted stronger demand.
The benchmark Stoxx Europe 600 Index dropped 1.1% to 238.24 at 12:29 p.m. in London as all 19 industry groups declined. The MSCI Asia Pacific Index rose 1.1%.