U.S. Futures, European Stocks Drop on Trichet, Dell; Yen Rises

By David Merritt
Nov. 20 (Bloomberg) -- Shares, U.S. stock-index futures and commodities fell after European Central Bank President Jean- Claude Trichet said policy makers will withdraw emergency cash gradually and Dell Inc.’s earnings trailed analysts’ estimates.
The yen rose.
Futures on the Standard & Poor’s 500 Index slid 0.8 percent at 7:18 a.m. in New York, while Europe’s Dow Jones Stoxx 600 Index dropped 0.9 percent. The yen strengthened against the 16 most-traded currencies tracked by Bloomberg. Copper fell 0.5 percent and crude oil retreated 1.2 percent. Two-year Treasury note yields fell 3 basis points to 0.675 percent, the lowest level this year.
Stocks and index futures slipped as Trichet said the ECB will remove liquidity in order to ensure the bank doesn’t fuel inflation. Asian stocks fell for a fourth day after Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., said there’s a "systemic risk" of new asset bubbles.
"Not all our liquidity measures will be needed to the same extent as in the past," Trichet said at a conference in Frankfurt today. "Any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally."

Emergency Exit

Trichet has already signaled the ECB is unlikely to renew its offer of 12-month loans to banks after the third installment in December. Council member Guy Quaden indicated this week that the bank may offer fewer three-month and six-month loans next year. At the same time, policy makers have stressed the exit from emergency lending measures doesn’t necessarily imply they will raise interest rates soon.
S&P 500 futures indicated the benchmark gauge for U.S.
equities may fall for a third straight day. Dell, the third- largest maker of personal computers, slid 6.1 percent in early trading in New York after reporting a 54 percent drop in profit.
Europe’s Dow Jones Stoxx 600 Index and the MSCI Asia Pacific Index fell for a fourth day, the longest losing streak since July. Asian shares declined after Sony Corp. said it will take longer to reach its profitability targets. Sony slid 2.4 percent in Tokyo.
The yen advanced 0.6 percent per euro and 0.1 percent versus the dollar. The pound fell against the dollar, the euro and the yen on concern that the U.K.’s budget deficit makes the currency a relatively high risk when investors are seeking assets perceived to be safer.

Too Much Cash

Policy makers from India, South Korea, and Indonesia say they are concerned too much money is flowing into their securities markets and driving currencies higher, which may prompt capital controls. Gross at Pimco said the Fed’s efforts to "reflate the economy" require interest rates at a "painful level" that drives investors into higher-risk assets. Earlier this week, Federal Reserve Chairman Ben S. Bernanke said it’s "not obvious" that U.S. asset prices are out of line with underlying values.
Russian stocks erased earlier gains after oil dropped. The Micex Index fell 0.7 percent to 1,325.86 in Moscow.
Crude oil for December delivery declined 0.4 percent to
$77.14 in New York. The December contract expires today. The more actively traded January contract was at $77.75.
Gold slipped 0.3 percent to $1,140.90 an ounce after reaching a record two days ago. Rhodium, used in catalytic converters, jumped 2.9 percent to $2,675 an ounce, for a weekly gain of 20 percent.
Treasury three-month bill rates turned negative yesterday for the first time since December as investors were willing to pay for the safety of the shortest-dated U.S. government assets.