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US STOCKS-Futures point to higher open on Bank of Japan move

Published 10/05/2010, 08:59 AM
Updated 10/05/2010, 09:04 AM
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* Bank of Japan to pump more funds into economy

* Oil futures, gold rise as dollar falls on Japan move

* ISM services index on tap, continued expansion seen

* Futures up: Dow 57 pts, S&P 8.9 pts, Nasdaq 18.5 pts (Updates prices, adds analyst quote)

By Ryan Vlastelica

NEW YORK, Oct 5 (Reuters) - U.S. stock index futures pointed to a higher open on Tuesday as global stimulative measures reassured investors that governments were taking protective steps against economic weakness.

The Bank of Japan will pump more funds into the struggling economy and keep rates close to zero, while Australia's central bank also kept rates low, in moves that surprised investors. The Nikkei jumped 1.5 percent on the fresh dose of stimulus, leading the way for expected U.S. market gains.

"Given unemployment and the state of the housing market, central banks didn't have a choice but to take steps like this, and it's what the market wanted to see," said Uri Landesman, president at the New York-based Platinum Partners. "This could be a sign of things to come."

In a sign of continued struggles for Europe, Moody's may cut Ireland's credit rating again, pointing to the huge bill for cleaning up its banks, a weak recovery and rising borrowing costs.

U.S. Federal Reserve Chairman Ben Bernanke said the Fed's asset purchases lowered borrowing costs and helped the economy, and that more buying could further ease conditions. The Fed bought $1.7 trillion in mortgage-related and Treasury bonds after cutting benchmark rates to near zero to combat the financial crisis and help the economy pull out of a severe recession.

S&P 500 futures rose 8.9 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 57 points and Nasdaq 100 futures rose 18.5 points.

Investors looked ahead to September's Institute for Supply Management's non-manufacturing index, which is expected to be largely unchanged from the prior month but still in expansionary territory. The business activity expectation is 54.0, compared with 54.4 last month. The Purchasing Managers Index (PMI) is seen at 52.0, up from 51.5 last month. Anything above 50 represents expansion. The data is due at 10 a.m. EDT (1400 GMT).

The services sector makes up the bulk of the economy, and traders hope for signs of strength a week after the ISM's manufacturing index showed the sector slowed in September.

Jack Ablin, chief investment officer at Chicago's Harris Private Bank, expects PMI to remain unchanged, "which would be a disappointment."

"We need to see improvement on the jobs front before we see the services sector higher, though the positive news on the monetary side in Japan should keep markets higher today."

Crude oil rose almost 1 percent and neared its highest price since Aug. 6. Gold hit a record high above $1,330 an ounce.

Fast food chain operator Yum Brands Inc is on tap to report third-quarter results after the market closes. The earnings season unofficially kicks off later this week with Alcoa Inc's results late Thursday.

Chevron Corp rose 1.5 percent to $82.49 in premarket trading after the No. 2 U.S. oil group said it plans to resume quarterly stock buybacks of up to $1 billion.

U.S. stocks fell Monday as investors used mixed economic data and worries about euro zone debt as a catalyst to shed long positions.

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