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Pre-Market Primer: Stocks Fall Ahead of Spanish Stress Tests


Spain's budget satisfies Europe, but we don't know how strong these banks are.

MINYANVILLE ORIGINAL Stocks are set to erase yesterday's gains as investors await the results of a stress test of Spain's banks.

US indices turned up yesterday as Spain vowed to cut its deficit and bad Chinese economic data raised expectations that the country will step up the fiscal and monetary stimulus that it already has in place.

Dow (INDEXDJX:.DJI) futures fell 0.52% to 13,344.00, S&P 500 (INDEXSP:.INX) futures slipped 0.47% to 1,434.30, and Nasdaq (INDEXNASDAQ:.IXIC) futures headed down by 0.35% to 2,804.75.

US personal income fell short of expectations last month. Income increased only 0.1%. Economists expected personal income to rise 0.2% after an 0.3% rise in July. Consumer spending fell right in line with expectations, speeding up from 0.4% gains in the month before. Later this morning, the Reuter's/University of Michigan Consumer sentiment survey is expected to show that US consumers are about as pessimistic as last month.

Yields on Spanish 10-year bonds rose 11.2 basis points to 6.058% ahead of today's publication of stress tests that Spain conducted on its banks. The independent tests will test whether capital requirements are sufficient to weather even worse conditions. Uncertainty over whether some banks will pass wore on investor sentiment today.

More lousy data poured out of Europe today. German retail sales in August increased 0.3% over July, but remained 0.8% below the figure for the year earlier. French GDP stagnated for a third straight quarter in the three months ending in June. Consumer manufactured-goods consumption in France fell more than expected in August, decreasing by 1.0% after gaining 0.5% in July. Producer prices in the country rose by 1.2% last month, exceeding expectations.
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