Global stocks looked set to step back on Tuesday as the early optimism over China's decision to allow its currency to float fades into ongoing concerns about government attempts to cut spending in the face of a debt crisis.
U.S. stock index futures were down with about 45 minutes before markets open, suggesting that stocks will fall at the start of trading. Futures for the Dow Jones industrial average were down 16 points or 0.2 per cent. Futures for the broader S&P 500 were down 2 points or 0.2 per cent.
Both indexes began the week on a strong note, rallying impressively at the start of trading on Monday. However, those gains faded as the day progressed, leaving both indexes down slightly at the end of the day.
In Europe, the U.K.'s FTSE 100 was down 1.2 per cent and Germany's DAX index was down 0.5 per cent in afternoon trading on Tuesday. In Asia, Japan's Nikkei 225 fell 1.2 per cent in overnight trading.
One of the key issues facing the stock market is how governments intend to react to pressure to cut spending even as the global economy remains fairly weak. The U.K. government said it will cut its budget deficit to 1 per cent of the country's gross domestic product within five years. Right now, the deficit is 10 per cent of GDP.
At the same time, though, the United States is maintaining that strong government spending is needed to keep the global economic recovery on track -- highlighting a conflict among developed nations that isn't being lost on investors. This will be one of the key issues discussed during the upcoming G20 summit in Toronto.