US futures drop as Iraq turmoil continues

New York - US stock index futures declined on Monday, on the heels of the S&P's biggest weekly drop since early April, as turmoil in Iraq sparked investor caution.

The United States is contemplating talks with its arch enemy Iran to support the Iraqi government in its battle with Sunni Islamist insurgents who routed Baghdad's army and seized the north of the country over the past week.

Geopolitical tensions in Ukraine also flared as Russian natural gas exporter Gazprom reduced supplies to Ukraine on Monday after Kiev failed to meet a deadline to pay off its gas debts in a dispute that could disrupt supplies to the rest of Europe.

Economic data expected on Monday include the Empire State manufacturing survey for June at 14:30. Expectations call for a reading of 15 versus the prior reading of 19.01.

At 15:15, industrial production data for May is due and the NAHB housing market index is set to be released at 16:00.

Industrial production is expected to show an increase of 0.5% against the 0.6% decline in the prior month. The housing market index is expected to climb to 47 from a prior 45.

S&P 500 e-mini futures were down 5 points and fair value - a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract - indicated a lower open.

Dow Jones industrial average e-mini futures fell 41 points and Nasdaq 100 e-mini futures lost 8.75 points.

Merger activity continued to be active. Medical device maker Medtronic Inc agreed to buy Dublin-based Covidien Plc for $42.9bn and shift its executive headquarters to Ireland in the latest move by US firms to harvest lower tax rates abroad.

Medtronic shares gained 11.9% to $67.90 in premarket trade while Covidien jumped 35% to $97.20.

Williams Companies climbed 12.4% to $53.03 before the opening bell. The pipeline operator said it agreed to acquire control of Access Midstream Partners LP for $5.99bn as the first step toward merging it with its operations. Jefferies subsequently upgrade Williams to a "buy" rating.

European stocks slipped in early trading and most Asian share markets struggled as mounting violence in Iraq prompted investors to lock in more profits on recent equity market gains.