US stock index futures rebounded on Wednesday from three days of losses on stronger-than-expected growth in China, but investors closely watched developments in Europe’s debt crisis.
Testimony from Federal Reserve Chairman Ben Bernanke will also be scrutinized for hints of new stimulus measures after June’s dismal US employment report. Optimism about the health of the global economy gathered pace after data showed China’s economy grew faster than expected in the second quarter, easing fears about a hard landing in the world’s second-largest economy.
But Nicholas Colas, chief market strategist at the ConvergEx Group in New York, said optimism over China would be unlikely to sustain a rally in the face of mounting investor concerns over sovereign debt at home and abroad.
“We are really focused on sovereign debt issues and those are still first and foremost,” he said. “Euro zone sovereign debt issues will soon be overtaken by the federal debt limit debate ... and that’s not a positive for stocks either.” S&P 500 futures rose 7.2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 51 points, and Nasdaq 100 futures added 14.50 points.
Investors remained cautious over developments in Europe. Moody’s downgraded Ireland’s debt to junk on Tuesday and said Ireland was likely to follow Greece in needing a second bailout. Irish bond yields jumped to record highs.
