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RTRS: US STOCKS-Credit worry set to sink Wall St at open
By Ellis Mnyandu

NEW YORK, Oct 6 (Reuters) - U.S. stocks headed for a slide at the open on Monday as concerns about the widening fallout from the credit crisis fueled a global equities sell-off and fears about a global recession mounted.

A spate of bank rescues in Europe heightened fears about the stability of global financial institutions.

Financial shares were poised to lead the slide on Wall Street after markets tumbled in Asia overnight. In Europe major indexes were off about 5 percent despite a push by Germany, Austria and other governments to reassure depositors about their funds.

And with signs that the credit markets remain strained, investors scurried toward the relative safety of government debt.

"We are headed for a sharply lower open. The fear of contagion is spreading on a daily basis, and that's why we are lower," said Peter Cardillo, chief market economist at Avalon Partners in New York.

"We are not seeing any real shift in interbank cost of borrowing, which basically means that credit markets are still locked up."

S&P 500 futures SPc1 dropped 25 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 slid 206 points and Nasdaq 100 NDc1 futures shed 24 points.

Expectations that the global sell-off might spark coordinated interest rate cuts by global central banks helped futures pare some of their losses. "The markets themselves are going to force some sort of coordinated action," said Cardillo.

A drop in oil prices below $90 a barrel underscored fears about the toll of the credit crisis on the outlook for global economic growth, said Cardillo.

He added that investors doubted that there would be immediate benefits from the $700 billion U.S. financial sector rescue plan passed by Congress on Friday as questions about how it will be implemented remained.

U.S. crude for November delivery CLc1 fell 4.4 percent to $89.79 a barrel.

In a bid to stave off further turmoil, France's BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) agreed to buy assets of troubled banking and insurance company Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz)(FOR.AS: Quote, Profile, Research, Stock Buzz) in Belgium and Luxembourg for 14.5 billion euros ($19.71 billion). For details, see [ID:nL6316554]

Over a frantic weekend, German officials clinched a revised rescue deal for lender Hypo Real Estate (HRXG.DE: Quote, Profile, Research, Stock Buzz) that will see commercial banks and insurers provide 15 billion euros in liquidity, on top of an initial pledge of 35 billion euros. [ID:nL584161]

In the United States, the Federal Reserve was pushing Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz) to compromise over their competing bids for hobbled U.S. bank Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) that could result in them carving up its assets, people familiar with the matter said.

Citigroup shares fell 6 percent to $17.60 before the bell, while shares of Wells Fargo slipped 2.1 percent to $33.84. Wachovia shares were off 3.9 percent at $5.97.

Wall Street ended its worst week in seven years with another tumble on Friday on fears the financial rescue plan may not unblock credit markets and stave off recession. (Editing by Kenneth Barry)