US pre-open: Futures drop sharply on China regulatory news

US stock futures took a drastic downward turn on Friday, after Chinese regulators said they will allow fund managers to lend stocks for short selling.

The Dow Jones Industrial Average is expected to open approximately 130 points lower, while the S&P 500 and the Nasdaq are expected to begin the final session of the week down 14 and 38 points respectively.

Futures on the Chinese indices were down more than 5% in after-hour trading at 12:20 BST, with US stock futures and European equities also suffering.

“What we’re seeing right now is a combination of panic and technical levels being wiped out and exacerbating the move lower,” said Oanda’s senior market analyst Craig Erlam.

On Friday, investors will receive an update on inflation, with consumer prices for March due out at 13:30 BST

“The biggest driver for the market on Friday could be the latest US inflation data, which is expected to tick slightly higher and eat into a major barrier to the Fed raising interest rates this year,” said CMC Markets analyst Jasper Lawler.

“The Fed’s preferred inflation measure, core PCE is below the Fed’s target of 2% but as long as inflation isn’t falling, the Fed may be able to look through it in order to get away from zero-interest rate policy.”

The University of Michigan consumer sentiment survey for April is released at 14:55 BST.

The earnings season continues with General Electric set to report after the opening bell, while Reynolds American and Honeywell International are also due to publish results on Friday.

American Express slid 1.9% ahead of the bell, after saying late on Thursday that its results were hurt by strong currency headwinds.

Mattel shed 0.4% in pre-market trading after the toy-maker posted a smaller-than-expected first quarter loss on Thursday, while Advanced Micro Systems plunged 11% after its first half loss was wider than estimated.

Schlumberger gained 1.8% before the open, after the oil field services group announced it would slash a further 11,000 jobs following a 39% decline in first quarter earnings.

Oil prices slid, with West Texas Intermediate losing 1% to $56.11 a barrel, while Brent crude dropped 0.7% to $63.49 a barrel.

The dollar declined 0.69% against the pound, falling 0.45% and 0.27% against the euro and the pound respectively, while gold futures climbed 0.44%.