US STOCKS-Futures slip as dollar firms

NEW YORK Tue Oct 12, 2010 7:39am EDT

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NEW YORK Oct 12 (Reuters) - U.S. stock index futures fell on Tuesday as the dollar firmed and an official Chinese newspaper confirmed the nation's central bank increased its required reserve ratio for six banks.

* Six banks had been hit with a 50 basis point increase in reserve requirements, the fourth hike this year, due to excessive lending, China Securities Journal reported, confirming a Reuters story Monday For details, see [ID:nTOE69A05I] and [ID:nTOE69A03Y]

* The dollar rose against the euro and a basket of currencies on a short-covering bounce ahead of the release of minutes from the U.S. Federal Reserve's Open Market Committee meeting from Sept. 21. The dollar index .DXY rose 0.3 percent to 77.733.

* "The dollar has really been the key driver in just about all asset classes, including the market. It's all a function of what our expectations are for quantitative easing come November," said Arthur chief market analyst at Jefferies & Co in Boston.

* The prospect of quantitative easing has created an inverse correlation between the dollar and equities as investors use the greenback as a trigger point to move into or out of stocks. [ID:nLDE69B0OQ]

* "The biggest driver for the market today before we get the Fed minutes and get into the meat of the earnings season is the pace of the dollar, and that firming up has got us a bit of a selloff," Hogan added.

* S&P 500 futures SPc1 lost 6.7 points and were below 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 DJc1 fell 55 points, and Nasdaq 100 futures NDc1 shed 9.75 points.

* The Fed, which will release the minutes at 2 p.m. EDT (1800 GMT), said after its Sept. 21 meeting it stood prepared to provide more support for the economy but expressed concern about low inflation.

* As the earnings season picks up steam, results are expected from Intel Corp (INTC.O), railroad operator CSX Corp (CSX.N) and industrial distributor Fastenal Co (FAST.O).

* European shares fell in early trading, tracking a decline in Tokyo and depressed by a drop in mining stocks on the back of a retreat in the price of copper and other metals. [.EU]

* Asian shares traded lower as indexes consolidated after recent gains amid caution ahead of the corporate earnings season. [ID:nSGE69B08B]

* U.S. stocks drifted in the lightest trading volume of the year on Monday as few dared to place bets ahead of key company results later this week. (Editing by Jeffrey Benkoe)

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