Futures drop before jobs data; Merrill dives

By Ellis Mnyandu

NEW YORK (Reuters) - U.S. stock futures fell on Friday as mounting concerns about a global economic slowdown diminished investors' appetite for risk and investors braced for the government's report on August non-farm payrolls.

Stock markets fell across Asia overnight, and Europe also traded in the red on Friday, boosting the allure of safe-heaven government debt. Benchmark 10-year U.S. Treasury yields fell to their lowest in 4-1/2 months.

After Thursday's sharp slide on Wall Street, investors feared that the jobs data might provide further signs of labor market deterioration as fallout from the housing slump hobbles the economy and darkens the profit outlook.

The payrolls report is due out at 8:30 a.m. (1230 GMT).

Merrill Lynch is poised to be among the high-profile drags after Goldman Sachs cut the investment bank to a "sell" and said it will likely incur additional write-downs for soured mortgage investments.

Merrill shares slid 6.5 percent to $24.48 before the bell.

"The economic backdrop remains reasonably negative," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

"We keep coming back to those stress points of the system where people are expecting the U.S. Federal Reserve to do something. It almost seems the market is looking for some sort of act to instill confidence."

S&P 500 futures fell 3.3 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 fell 28 points and Nasdaq 100 futures lost 0.75 point.

On the bright side, shares of UST Inc jumped 18.6 percent to $64.06 before the bell after the New York Times reported that Altria Group Inc is in advanced talks to buy the maker of Skoal and Copenhagen smokeless tobacco for $10 billion. The newspaper cited people close to the negotiations.

A median forecast by 87 economists in a Reuters poll anticipates the Labor Department will report employers cut 75,000 jobs outside the farm sector in August after dropping 51,000 in July.

U.S. stocks suffered their steepest decline in more than two months on Thursday, as more signs of weakness in the labor market and increasingly sluggish growth overseas fueled fears about the ability of the U.S. economy to stage a recovery.

(Editing by Kenneth Barry)

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