NEW YORK (CNN/Money) -
World events shook U.S. stock futures Thursday, as a move by China to no longer peg its currency to the dollar gave a sharp but only temporary lift, followed by a fall after reports of emergency services called to three London underground stations.
The surprise move by China, reported just after 7 a.m. ET, would have its currency, the yuan, pegged to a basket of currencies rather than just tied to a fixed exchange rate to the dollar. It also vauled the yuan 2 percent higher against the dollar, effective immediately.
The move is seen as a benefit to many U.S. firms, which could face less competition from lower-priced Chinese imports or get more money for their sales in the world's largest country. Congress has been threatening to impose trade sanctions on China without a change in value of the yuan, which is seen as one of the causes of the $72.5 billion trade gap between the two countries the first five months of this year.
U.S. stock futures soared immediately after the reports, after being mixed in earlier trading. But by 8 a.m. most of those gains had evaporated.
"One of the reasons stock futures went up is it reduces the risk of a political confortation, rather than changes the economics of trade," said Jay Bryson, global economist for Wachovia Securities. "Obviously it was a knee jerk reaction, and like any other knee jerk reaction, that type of thing calms down."
"It'll be interesting to see how this settles out at the end of the day," he added. "Will it cause market to rise 500 points? I don't think so. Two percent is not that much of a change."
Then around 8 a.m. ET came reports out of London that Scotland Yard was responding to three new "incidents" in London's underground system, and futures dipped further.
Before the news from China and London it appeared earnings reports would drive trading. Nasdaq futures were pointing higher even before the China news after strong earnings from eBay (Research) late Wednesday. Nasdaq closed Thursday at a four-year high.
Oil prices were lower in early trading.
The September U.S. light crude futures contract lost 34 cents to $57.68 a barrel in electronic trading, while the September contract for Brent crude fell 7 cents to $56.58.
Major markets in Asia closed mixed Thursday after several markets hit high for the year earlier in the session. Major European markets were higher in early trading.
Treasury prices slid on the yuan move, with the yield on the 10-year note rising to 4.21percent at 4.16 percent. The dollar lost ground against the euro and the yen.
In other corporate news, the Wall Street Journal reported Thursday that several top executives and board members at Delta Air Lines (Research) have warned CEO Gerald Grinstein that a turnaround plan there isn't working and that a Chapter 11 bankruptcy filing for the nation's No. 3 airline is inevitable. Delta is also set to report results early Thursday.
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