Associated Press
NEW YORK — U.S. futures slid as the risk of economic contagion from Spain migrated to Italy in the form of higher borrowing costs.
An Italian debt auction Wednesday showed the country’s borrowing rates have risen to the highest levels of the year, fast on the heels of Spain, which saw its rates jump dangerously close to 7 percent this week.
And new evidence Wednesday that consumer spending in the U.S. is losing momentum pushed futures further into negative territory.
Dow Jones industrial average futures fell 51 points to 12,463. Standard & Poor’s 500 futures slid 7.6 points to 1,312.50. Nasdaq composite futures gave up 11.25 points to hit 2,533.75.
U.S. retail sales declined in April and May, the Commerce Department reported Wednesday before the market opened. Even excluding volatile gas sales, consumers barely increased their spending, suggesting that with weakening job growth and unsatisfactory increases in wages, consumers may be entrenching themselves once again.
Retail sales dipped 0.2 percent in May. That followed a revised 0.2 percent decline April, the first back-to-back declines in two years.
However, futures were already heading lower as debt auction in Italy revealed that the country’s cost of borrowing money had hit the highest point since December.
A sale of 12-month bonds, a potential precedent for Thursday’s weightier long-term debt auction, may suggest the rapidity in which one European country’s problems, in this case Spain, can travel to another.
Over the weekend, Madrid acknowledged that its banks are under so much stress that a bailout is needed. What may be most telling is that Italy is in much better shape financially than Spain.
The perception of vulnerability appears to be overshadowing fundamentals.
Even though Italy’s finances are sound, it is still a bad time to be stuck with harsher borrowing terms.
Italy paid an interest rate of 3.972 percent — up from 2.34 percent in a similar auction last month — to borrow $8.12 billion in 12-month money from bond markets.
France’s CAC-40 dropped 0.5 percent to 3,033, while the DAX in Germany fell the same rate to 6,129. The FTSE index of leading British shares is down 0.1 percent to 5,469.
