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Stocks Sink as Merkel Builds Coalition; BlackBerry Ltd Falls on Revenue Warning


BlackBerry co-founder Mike Lazaridis still wants to take a stake in the company.

US stock futures were slightly lower today as investors await speeches from Fed members and Angela Merkel works to build a new coalition government in Germany.

Merkel's Christian Democratic Union handily won this weekend's election with the largest share of the vote since 1990. One coalition partner, the pro-business Free Democrats were wiped out since they failed to garner 5% of the vote. This might force Merkel to forge an alliance with a more left-leaning party such as the Social Democrats or Greens to form a government. At midday in Germany, the DAX (INDEXDB:DAX) index was down 0.23%.

Other European markets also declined slightly amidst flash composite PMI readings. In the eurozone, the preliminary reading of the September index rose to a 27-month high of 52.1 from 51.7 in August, beating expectations, mostly thanks to improved services conditions. (Readings over 50 signal expansion in the service and manufacturing sectors.) Manufacturing unexpectedly showed a slower rate of expansion. German composite PMI fell to 51.3 from 51.8 and France fell to 49.5 from 49.7.

Chinese shares rose today as manufacturing activity reached a six-month high. HSBC's flash PMI climbed to 51.2 from 50.1, thanks to both domestic and export demand.

Still to come later this morning is Markit's US flash manufacturing PMI, which is expected to improve to 54 from August's 53.1.

Before the opening bell, Dow (INDEXDJX:.DJI) futures were off 0.13% at 15,383 while futures contracts on the S&P 500 (INDEXSP:.INX) sank 0.18% to 1,699.30. Nasdaq (INDEXNASDAQ:.IXIC) futures fell 0.10% to 3,213.25.

Gold prices fell 0.77% to $1,322.50/ounce as the dollar strengthened and both Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) warned that gold's gains after last week's Fed announcement will not last long.

Three Federal Reserve presidents -- Atlanta's Dennis Lockhart (who is not currently a voting FOMC member), New York's William Dudley, and Dallas' Richard Fisher-- will deliver speeches today that might clarify the central bank's thinking on the decision not to cut back on quantitative easing this month.

Citgroup (NYSE:C) shares were down 2.3% after the Financial Times reported that the bank's trading revenues fell sharply, which could seriously hurt overall earnings. Citigroup has a high exposure to emerging markets, which have fared poorly since the May announcement that the Fed will cut back on asset purchases.

BlackBerry Ltd. (NASDAQ:BBRY) sank 6.5% this morning, following a 17% drop on Friday after the Canadian smartphone maker warned that revenue for the second fiscal quarter will be far below expectations. Jeffries Group also lowered its recommendation on the shares to hold from buy, and nearly halved its 12-month price target to $8 per share from $15. Meanwhile, co-founder Mike Lazaridis is reportedly working with private equity firms to put in a bid for his old company. Lazaridis was co-CEO with Jim Balsillie until last year and remains one of BlackBerry's biggest shareholders.

General Electric (NYSE:GE) advanced 0.83% after the conglomerate secured three contracts with Sonelgaz, Algeria's state-owned utility company, to make 26 gas turbines for six power plants. The deal is reportedly worth $1.9 billion.

Disclosure: Minyanville Studios, a division of Minyanville Media, has a business relationship with BlackBerry.

Twitter: @vincent_trivett
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