European stocks give up seven-year high

US equity-index futures fell with European stocks as results by companies from Caterpillar to Microsoft and Siemens disappointed investors.

Greek bonds slid for a second day while US natural gas jumped as a snowstorm blanketed the country’s northeast. Standard and Poor’s 500 Index futures slipped 0.7 per cent at 7:43 a.m. in New York. Dow Jones Industrial Average contracts dropped 1.1 per cent. The Stoxx Europe 600 Index also lost 0.7 per cent, declining from a seven-year high. The euro climbed 0.5 per cent to $1.1294.

The yield on 10-year Greek debt jumped 34 basis points to 9.43 per cent and shares headed for the biggest two-day drop in three weeks.

Russian bonds declined and credit risk rose after S&P cut the country’s rating to junk.

US natural gas advanced 2.5 per cent, paring earlier gains.

Caterpillar, the world's largest manufacturer of mining and construction equipment, reported profit that missed estimates, while Microsoft's software-license sales to businesses that trailed estimates and Siemens posted a decline in first-quarter profit. Caterpillar and Apple are among companies set to release earnings.

European finance ministers signaled willingness to work with Greek Prime Minister-elect Alexis Tsipras as long as he drops demands for a debt writedown. "With Siemens, it's worrying in the sense that Germany's an industrial power and a good part of their business is exports," Jasper Lawler, a market analyst at CMC Markets Plc in London, said by telephone. "There's going to be a lot of focus on the negotiations between Greece and the Troika. Whenever we hear parties involved making commentary, there's going to be volatility. It's adding to the distrust of how the euro zone functions."

Profit drop

The Stoxx 600 halted an eight-day winning streak, its longest since April. Greece's benchmark index slid 3.7 per cent, extending declines since Sunday's elections to 6.9 per cent. Siemens, Europe's biggest engineering company, retreated 2.9 per cent. Royal Philips NV fell 5.9 percent after saying it is behind on its 2016 financial targets. EasyJet Plc climbed 2.1 per cent after posting an increase in first-quarter revenue, and Novartis AG rose 1.4 per cent after posting fourth-quarter profit that beat analysts' estimates. The world's biggest drugmaker by sales also said revenue growth will resume this year, with earnings gains exceeding sales increases. Microsoft lost 5 per cent.

The yield on five-year Russian government debt rose 30 basis points to 15.55 per cent, and the cost of protecting against default increase 12 basis points to 603, near the highest level since 2009, CMA prices show.

Russia downgrade

The dollar-denominated RTS slipped 0.7 per cent, while the Micex gained 1.9 per cent. The ruble advanced 1.6 per cent against the dollar after losing 6.6 percent yesterday. SandP, which last downgraded Russia in April, cut the sovereign one step to BB+, the same level as countries including Bulgaria and Indonesia. The ratings firm said the outlook is “negative.”

The European Union will probably toughen sanctions linked to the conflict in Ukraine, adding more individuals to a list of those facing visa bans and asset freezes rather than impose economic sanctions, Latvian President Andris Berzins, whose country holds the EU's rotating presidency, said Monday in a Bloomberg interview. The step may take place at a foreign ministers meeting set for Jan. 29 in Brussels, he said.

Chinese stocks fell for this first time in six days in Shanghai after industrial profits declined the most in at least three years last month. The Shanghai Composite Index lost 0.9 per cent after closing at a more than five-year high on Monday.

Bloomberg