By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) -- U.S. stock index futures pointed to a lower start for Wall Street Monday, with sentiment soured by concerns over China's attempt to cool home prices and the lack of any progress toward reversing tens of billions of dollars in automatic federal spending cuts that began to take effect at the end of last week.

S&P 500 Index futures (SPH3) fell 4.4 points, or 0.3%, to 1,512.10, while futures on the Dow Jones Industrial Average (DJH3) lost 34 points, or 0.2%, to 14,040.

Nasdaq 100 futures (NDH3) dropped 7 points, or 0.3%, to 2,741.75.

"Chinese tightening of [monetary policy] amidst soaring property prices is the first test of investor resolve to push equity markets on to higher ground this week," said Michael McCudden, head of derivatives at stockbroker Interactive Investor in London.

Mainland Chinese stocks tumbled sharply Monday after Beijing at the end of last week announced new property-buying restrictions, including higher down payments and mortgage rates on second homes in cities that have seen steep increases in property prices. Authorities also imposed a 20% capital gains tax on sales of existing homes. See: China adviser: Property curbs may hit demand.

China's Shanghai Composite Index dropped 3.7%, its biggest percentage fall since August 2011. See: Property stocks sink Shanghai, support Tokyo.

Closer to home for U.S. investors, automatic spending cuts began to kick in on Friday as politicians proved unable to come up with an agreement to avoid them by coming up with a long-term deficit reduction plan.

Republican congressional leaders on Sunday said they would continue to insist that deficit reduction come exclusively through spending cuts, rejecting calls by Democrats and the White House for a mix of spending cuts and tax increases. See: Republicans insist spending cuts will stay.

"I can't get away from the sense that U.S. political protagonists quite like the idea of some fiscal tightening that they can blame on 'the other guys,'" said Kit Juckes, head of foreign exchange at Societe Generale. "But the sequester cuts 2013 GDP forecasts by between 0.2% and 0.5% and fuels the risk averse mood as we await payrolls on Friday and through a period of very limited economic data in the interim."

Italian politics may also intrude on the mood on Wall Street. Italian political leaders continue to struggle to put together a government a week after inconclusive parliamentary elections.

European stocks fell, with the Stoxx Europe 600 index down 0.2%. See: Europe stocks key off Asia losses.

Shares of banking heavyweight HSBC Holdings PLC ( HBC ) dropped more than 3% in London after it reported 2012 net profit fell to $13.5 billion from $16.22 billion in 2011. See: HSBC lifts dividend but misses performance targets.

There are no major economic reports set for release on Monday, but Federal Reserve Vice Chair Janet Yellen will address the National Association of Business Economics conference in Washington.

The topic of her speech is "challenges confronting monetary policy." See: What to watch on the U.S. economy on Monday.

The main event on the economic calendar comes on Friday, with the release of February nonfarm payrolls data and other employment figures. Economists surveyed by MarketWatch produced a consensus forecast for payrolls to rise by 160,000 versus 157,000 in January. See Economic Preview: Washington morass fails to stop jobs improvement.

The unemployment rate is expected to be unchanged at 7.9%.

Many investors likely spent the weekend picking through Warren Buffett's annual investor letter, in which he lamented that Berkshire Hathaway Inc.'s (BRKA) (BRK/A) $24.1 billion net gain for shareholders and 14.4% rise in book value in 2012 was a "subpar" performance. See: Buffett says $24 billion gain wasn't good enough.

The S&P 500 (SPX) rose 16% last year, including dividends.

Drugmakers may bear watching after doctors announced Sunday that a baby had been cured of an HIV infection for the first time. See: Watching drugmakers after baby cured of HIV.

Shares of Transaocean Ltd. ( RIG ) may be in focus after it said late Friday that it swung to a quarterly profit. The company benefited from better comparisons with the year-earlier period when it booked a large impairment charge and loss contingencies tied to the 2010 Deepwater Horizon explosion and oil spill. See: Stocks to watch Monday: Transociean, Stratasys.

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