* China stocks lead correction in global equities
* Buffett warns US on side effects of "monetary medicine"
* Futures down: S&P 11.4 pts, Dow 92 pts, Nasdaq 21 pts
* For up-to-the-minute market news, click STXNEWS/US
(Updates with Goldman Sachs ratings)
By Edward Krudy
NEW YORK, Aug 19 (Reuters) - U.S. stock index futures
pointed to a fall of about 1 percent on Wednesday as a drop in
Chinese shares prompted renewed selling in global equity
markets on fears stock prices have outpaced the economic
recovery.
China shares slid 4.3 percent, led by recently listed
stocks, as nervous investors bailed out on worries the 20
percent slide in just two weeks would deepen, shrugging off
official efforts to talk up the market. []
The wave of selling in global equity markets was similar to
Monday's sell-off when markets took their cue from trading in
Asia, with investors concerned the economic recovery would be
slow.
Adding to the gloom, billionaire investor Warren Buffett,
who runs insurance and investment company Berkshire Hathaway
Inc <BRKa.N><BRKb.N>, warned that although the United States
was on the road to recovery, public debt was becoming
unsustainable after government measures to stimulate the
economy, which he termed "monetary medicine". []
"China certainly is the big story again today, its been an
ongoing trend," said Arthur Hogan, chief market analyst at
Jefferies & Co in New York. "It's a similar story to what we've
seen - we come in and Asian markets are down, and it flows
through the European markets and hits our shores."
"In general it's a reset of valuations in China to match
current realities in terms of the global economy," he said.
"Unfortunately while that's happening the rest of the world's
going to follow suit."
Some analysts are predicting that U.S. equity market will
undergo a similar correction to that in China after the broad
S&P 500 <.SPX> rallied nearly 50 percent from March lows.
In Tokyo, the Nikkei stock average <> lost 0.8 percent
and hit a three-week closing low, while European stocks as
measured by the FTSE Eurofirst 300 <> fell 1 percent.
S&P 500 futures <SPc1> fell 11.4 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 92
points, and Nasdaq 100 futures <NDc1> fell 21 points.
Goldman Sachs downgraded aluminum giant Alcoa Inc <AA.N> to
neutral, citing a lack of upside potential and historic high
levels of global aluminum inventories. At the same time Goldman
resumed coverage of miner Freeport McMoRan Copper & Gold Inc<FCX.N> with a "buy" rating.
Alcoa's shares fell 3.6 percent to $12.46 in premarket
trade, while Freeport McMoRan fell 1.3 percent to $59.70.
In another sign that the recovery may be slow,
Hewlett-Packard Co,<HPQ.N> which reported slightly
better-than-expected quarterly results after the bell on
Tuesday, expressed caution about business demand, sending its
shares down 2.5 percent before the bell. []
Deere & Co <DE.N> said on Wednesday its earnings in the
latest quarter fell 27 percent as ongoing weakness in its
construction and forestry equipment business offset strength in
demand for its tractors and harvesters, especially in North
America. Its shares fell 2.8 percent to $43.85 after a initial
jump. []
(Reporting by Edward Krudy; Editing by Padraic Cassidy)
