Equity futures have just fallen to morning lows (S&P futures -7, DJ futures -55) as European markets gave up their early gains on concerning talk out of Hungary . A Bloomberg report indicates that the Prime Minister's spokesman Szijjarto said that Hungary default talk is 'not an exaggeration," that Hungary 's economy is in a "very grave situation" and that Hungary will not implement austerity measures. The news has dragged the euro lower (currently at $1.2111/euro), sent the major European indices into negative territory (FTSE -0.5%, DAX -0.3%, CAC -1.0%) and weighed on U.S. equity futures. Hungarian bond spreads are widening and CDS have risen on the remarks. While Hungary is one of the smaller EU countries (with a population of 10 million people), which was bailed out last year with a 20 bln euro package, the reemergence of default talk raises the specter for the entire region. Hungary contributes about 0.8% of total eurozone GDP. Hungary 's Traded Index is -7.4%.
Other than the Hungary headlines, the morning has been relatively quiet ahead of the 8:30 ET May Employment Report. Expectations for a big increase in Nonfarm Payrolls to 500K from 290K in April, while the Unemployment Rate is expected to come in at 9.8%, down a hair from April's 9.9% reading. The tone of the employment data will likely have an influence on how the market opens, but the Hungary situation may overshadow any positive economic news. The calendar remains light throughout the rest of the day, but headlines with regard to Hungary , the energy sector and any currency fluctuations will be of interest throughout the day.