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U.S. Stock Futures Rise on Fed Speculation

U.S. stock-index futures climbed amid continuing speculation the Federal Reserve will act to prop up the faltering economic recovery and as a contraction in Chinese manufacturing eased.

Alcoa Inc., the biggest U.S. aluminum producer, and Caterpillar Inc., the world’s largest maker of construction and mining equipment, increased more than 1 percent in early New York trading. Freeport-McMoRan Copper & Gold Inc. rose as copper advanced. McGraw-Hill Cos. may be active as shareholders sought to break the company into units.

Standard & Poor’s 500 Index futures expiring in September advanced 1.4 percent to 1,139.1 at 7:09 a.m. in New York, having earlier rallied as much as 2 percent. Futures on the Dow Jones Industrial Average rose 131 points, or 1.2 percent, to 10,978.

“The market is up thanks to China,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, who helps oversee about $400 million in stocks. “Economic statistics are helping. The situation isn’t as dark as everyone thought.”

Chinese manufacturing may contract at a slower pace this month as the world’s second-biggest economy weathers slumping global confidence, according to a preliminary purchasing- managers index compiled by HSBC Holdings Plc and Markit Economics. The reading of 49.8 for August compared with 49.3 last month. A result below 50 indicates a contraction.


Fed Stimulus

Most U.S. stocks fell yesterday as declines by Goldman Sachs Group Inc. during the last 15 minutes of trading erased an intraday advance on hopes Fed Chairman Ben S. Bernanke will unveil new stimulus measures as soon as this weekend. The S&P 500 fell 16 percent from July 22 through the end of last week and its members trade at an average 11.3 times estimated earnings, near the lowest level since March 2009.

A four-week global equity rout has wiped about $8 trillion from companies’ market value as Europe’s sovereign debt-crisis and worsening economic reports in the U.S. raised concern the global economic recovery is faltering. Central bankers from around the world converge on Jackson Hole, Wyoming, this week for a conference that last year resulted in Bernanke signaling a second round of asset purchases that buoyed asset markets.

Show Its Commitment

“Investors are hoping the Fed will show its commitment to supporting growth,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., which manages almost $100 billion. “There’s a real risk of disappointment if some sort of strong commitment doesn’t appear. Still, corporate health looks good, sentiment has moved to pessimistic extremes, and valuations are very attractive, so we could be in for a strong, tradable short-term rally.”

U.S. futures pared their advance as a gauge of German investor confidence fell more than economists forecast to the lowest in more than 2 1/2 years in August on concern Europe’s debt crises will curb growth.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, dropped to minus 37.6 from minus 15.1 in July. That’s the lowest since December 2008. Economists expected a decline to minus 26, according to the median of 36 estimates in a Bloomberg survey.

Purchases of new U.S. homes probably fell for a third straight month in July, pointing to lingering housing market weakness two years into the economic recovery, economists said before a report today. Sales fell 0.6 percent to a 310,000 annual pace, the slowest in four months, from a 312,000 rate in June, according to the median estimate of 75 economists in a Bloomberg News survey.

Source: Nick Gentle and Adria Cimino (Bloomberg)