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futures point to firm wall st

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    LONDON, Feb 26 (Reuters) - U.S. stocks are expected to open
    up on Tuesday, with investors studying inflation data for clues
    on whether the Federal Reserve will continue to cut rates and
    company results for any signs of a slowdown hitting earnings. At 1040 GMT, futures for the S&P 500 , the Dow Jones
    industrial average were up 0.2 percent, while Nasdaq
    futures were up 0.6 percent.

    U.S. producer prices at 1330 GMT will be the key piece of
    macroeconomic data, a month after the Fed cut rates by 125 basis
    points in two tranches to prevent a recession.

    Analysts said inflation -- fuelled by rising oil and
    commodity prices -- would decide whether the Fed's rate cutting
    would come to an abrupt end, even as economic growth slows.

    "Central banks all over the world are more concerned about
    inflation than perhaps investors realise," said Commerzbank
    economist Peter Dixon, adding that inflation was more of a
    threat now than in earlier downturns because of commodity price
    rises driven by Asian demand.

    But he said he expected the Fed would still cut rates next

    "We expect a further 50 basis point cut in March and,
    depending on data thereafter, rates have the potential to fall
    as far as 2 percent," he said.

    The federal funds rate is currently at 3 percent.

    Stocks rallied on Monday on signs that the two largest bond
    insurers would stabilise. A person briefed on the matter said
    that any deal to rescue bond insurer Ambac Financial Group
    would likely be signed early next week.

    Standard & Poor's removed its threat to downgrade MBIA Inc's
    AAA rating, soothing market fears of a cascade effect on
    banks, who hold debt insured against default by the bond
    insurers. Any downgrade in the insurers' ratings would affect
    the rating of the debt they insure.

    On Monday, the Dow Jones industrial average surged 1.5
    percent, while the broad S&P 500 rose 1.4 percent and the
    tech-laden Nasdaq <.IXIC> rose 1.05 percent.

    Major companies due to update on Tuesday include foods group
    HJ Heinz , home improvement retailer Home Depot
    and Target Corp and department store chain Macy's .

    Dixon said while investors had focused on the impact of
    credit-related writedowns on company results, the hit from the
    resulting slowdown in the economy had yet to be understood.

    "We remain fairly bearish on the outlook for U.S. equities,
    and by extension on European shares," he said.

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