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Pre-Market Primer: Stocks Fall as China Tries to Stop Bubble


No progress on the sequester cuts.

Stocks are set to decline today as China made changes to its property market and US lawmakers made no progress on stopping the $85 billion in fiscal cuts.

The weekend brought no solution to the automatic federal spending cuts known as the "sequester." The Congressional Budget Office estimates that the $85 billion in yearly fiscal cuts that went into effect on Friday will result in a 0.6% percentage point reduction in GDP this year. The biggest share of the cuts will affect the military.

Before the opening bell, stock index futures are sinking. Dow (INDEXDJX:.DJI) futures are 0.14% lower at 14,054. Futures on the S&P 500 (INDEXSP:.INX) slipped 0.11% to 1,514.80 and Nasdaq (INDEXNASDAQ:.IXIC) futures fell 0.25% to 2,741.75.

Italy's political uncertainty took its toll on eurozone investor confidence. The index of investor mood fell to -10.6 this month from -3.6 in February. Economists expected a smaller drop. Sentix, the group that publishes the index, said that it is "obvious" that the six-month trend reversed as a direct result of the Italian election, which resulted in a hung Parliament. The leader of the center-left party that won the lower house indicated that a second election could be necessary.
Spain reported a 1.2% rise in unemployment for February. Jobless in the country number more than 5 million.

China's service sector expanded at the slowest pace since September 2012 last month. The official services Purchasing Manager's Index fell to 54.5 from 56.2 in January. Readings over 50 signal growth in the sector.

At the end of last week, the Chinese government announced policies aimed at cooling the property market, including higher down payments and more expensive mortgages for certain areas that are showing signs of a property bubble. To prevent house-flipping behavior, the government began taxing capital gains on home sales. Mainland Chinese equities, especially homebuilders and property stocks, fell sharply overnight, taking Australian shares down with them.

Casino operator Las Vegas Sands (NYSE:LVS), is under investigation in the US for violating the Foreign Corrupt Practices Act, which forbids bribing overseas officials. In an SEC filing, the company said that it expects no financial impact from the inquiry despite booking 60% of its revenue in Macau. The company is also in a lawsuit with the former Sands China CEO, who says that he was fired for not engaging not being willing to engage in illegal activities demanded by the company's billionaire chief Sheldon Adelson.

Samsung (KRX:005930) said that it plans to reduce its payment to Apple (NASDAQ:AAPL) even further. Last summer, a California judge awarded Apple $1.05 billion from Samsung for violating Apple's design patents. The same judge later reduced the payment by $450.5 billion.

Twitter: @vincent_trivett
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