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Pre-Market Primer: Euro Finmins Take the Pressure Off of Spain


Spain will have more time to get in line with eurozone fiscal rules. Also, China's imports fell, putting downward price pressure on oil futures.

MINYANVILLE ORIGINAL Eurozone finance ministers convened in Brussels last night and resolved to take some pressure off of Spain, giving the country an extra year to get its deficit in line with the eurozone's internal rules. Madrid will now have until 2014 to cut its deficit to below 3% of gross domestic product. Last year, Spain's deficit hit 8.9% of GDP.

This news will be welcomed by those economists who contend that reeling in government spending during an economic downturn has a negative effect on employment and makes recovery harder to reach.

The ministers also promised that the first 30 billion euros of bailout funds will be available to recapitalize banks if necessary. 100 billion euros in total will be dedicated towards saving banks that are suffering from loan losses stemming from the collapse of the country's housing market.

Spain's 10-year bond yields dropped 25 basis points to 6.815% on the news. Uncertainty over how the bank bailout will be handled had worn on investor confidence in Spain's debt.

European stocks traded higher today on reports that industrial production unexpectedly increased on a monthly basis in May in Italy and Britain. Factory output in France, however, declined by 1.9%.

China's trade balance hit a three-year high of $31.7 billion in June as exports beat expectations, rising 11.3%. Imports to the country trailed estimates, increasing only 6.3%.

Oil futures fell in price on the news that China's crude imports fell. The oil workers' strike in Norway has also been resolved, relieving upward oil price pressure. WTI crude futures are down 0.37% at $85.67/barrel this morning.

A drought in the US Midwest drove corn futures up 4% to $7.7525 per bushel as farmers worry that the next harvest will be lighter than expected. The weather could drive the harvest down by as much as one billion bushels below the government's estimates.

US stock futures are pointing upwards this morning, following European equities benchmarks, while Asian indices declined. Ahead of the opening bell, Dow (^DJI) futures are up 0.21% at 12,712.00. S&P 500 (SPY) futures rose 0.07% to 1,350.20 and Nasdaq (^IXIC) futures climbed 0.17% to 2,610.50.

Alcoa (AA) beat estimates in the second quarter, earning $0.06 per share despite aluminium's 20% price drop since March.

"Although aluminum prices are down, the fundamentals of the aluminum market remain sound with strong demand and tight supply, and Alcoa is successfully capitalizing on accelerating demand in high-growth end markets such as aerospace and automotive," the Pittsburgh-based company said in a statement.

Google (GOOG) paid only a nominal $22.5 million to settle a suit with the Federal Trade Commission for its surreptitious changing of privacy settings on the Safari browser on Apple (AAPL) products such as the iPhone and iPad. The default privacy settings on the browser disables cookies that Google needs to target users with relevant ads. Google changed those settings in some instances without users' knowledge.

Twitter: @vincent_trivett
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