Indexes set to fall amid global sell-off

NEW YORK, Mar 5 (Reuters) US stocks were set to start the week sharply lower on Monday as a reduced appetite for riskier assets persisted, hitting overseas markets overnight.

Stocks in Europe sank to three-month lows on Monday, while the Nikkei average fell 3.34 percent, marking its biggest one-day tumble in nine months and a new low for 2007.

On Friday, U.S. stocks capped their worst week in more than four years, reflecting the rapid move away from risk.

The yen surged, increasing concerns about its implications for popular carry trades, in which investors borrow in low-yielding currencies and use the proceeds to invest in markets with higher returns.

''There's another round of selling here. It's important to remember that one of the catalysts for the sell-off, as it began last Tuesday, was some concerns about what the Chinese government was going to do to regulate its markets, and those decisions are going to be made today,'' said Arthur Hogan, chief market analyst at Jefferies&Co. in Boston.

S&P 500 futures were down 9.90 points, below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures were down 90 points, while Nasdaq 100 futures were down 16.26 points.

The sell-off began on Tuesday when China's benchmark stock index fell almost 9 percent, its sharpest drop in a decade, and that led to waves of selling on Wall Street and in stock markets around the world. For the three major U.S. stock indexes, this week's plunge wiped out their gains for the year.

''That's part of the reason why we're seeing more selling pressure coming out of the Asian markets and flowing through the European markets. It appears as though the contagion will continue to the Americas,'' said Hogan.

But Chinese shares on Monday ended well above intraday lows, boosted by officials' comments at the start of a parliamentary session. This year's meeting of the National People's Congress, China's parliament, began on Monday.

In economic news, the Institute for Supply Management's nonmanufacturing index, which is due at 10 a.m. (1500 GMT), could shed light on how the services sector is faring. A Reuters poll of economists forecast the index at 57.2, down from 59 the previous month.

Subprime lender New Century Financial Corp. on Friday said it faces a federal criminal probe, and smaller rival Fremont General Corp. agreed to a cease-and-desist order with the federal regulators and is talks to sell its subprime mortgage unit.

Research in Motion Ltd. said a review of stock options grants will cause it to restate its financials for fiscal 2004, 2005 and 2006 as well as the first quarter of 2007. For details, see ID:nWEN5082.

During last week's sell-off, investors opted to buy U.S.

Treasuries for their relative safety and drove bond prices higher for their best week in months.

For the week, the Dow fell 4.2 percent, its worst week since March 2003, while the S&P 500 lost 4.4 percent, its worst week since January 2003.

REUTERS CS HS1816