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Pre-Market Primer: How Soon Will Spanish Banks Need a Bailout...And Who Ya Gonna Call?


Non-performing loans at Spanish banks hit an 18-year high, stoking fears that the banks, or Spain itself, will need to be rescued. Plus, IBM and Intel both fell pre-market.

Stock futures fell today as investors worry over European debt troubles and look forward to earnings statements from 22 S&P 500-indexed companies.

After having its biggest rally in a month yesterday, the S&P 500 (SPY) is pointing towards a lower open this morning. Futures on the S&P fell 0.20% to 1,380.80. Dow (^DJI) futures also fell 0.20% to 12,998.00. Nasdaq (^IXIC) futures ticked down 0.07% to 2,710.75.

European shares declined today after some weak economic data was released. Construction in the eurozone in February plunged 7.1% on a monthly basis. This is the third straight month of decline in construction output. In Italy, construction output fell 9.9% from January's level, 20% from the year before.

Fears that Spain's banks, or even the entire country, will need to be rescued were exacerbated by some harrowing data from the Bank of Spain. Non-performing loans increased in February. Bad loans make up 8.2% of banks' credit portfolios, the worst level since 1994. Before the housing market in Spain collapsed, that number was below 1%. The high rate of unemployment is making it harder for Spanish families to pay back their debt. Spanish mortgages are very different from American ones. Most banks issue recourse loans, so when Spaniards walk away from their mortgages, the banks can harass them until they are repaid in full.

Germany sold 4.21 billion euros of two-year bunds at a record low yield of 0.14% after the Portuguese Prime Minister admitted in an ostensibly optimistic Financial Times op-ed that there is "no guarantee" that his country will return to financial markets by 2013.

Jobless claims in the UK rose by 3,600 last month, but the unemployment rate in the country fell to 8.3% from 8.4%.

Asian shares mostly rallied despite a report from China that showed that home prices in the country are continuing to fall. The government reported that home prices fell in 37 out of the 70 cities that it tracks.

Oil futures rose 0.20% to $103.99 this morning. The Energy Information Administration will release its weekly petroleum status report at 10:30 a.m. New York time.

International Business Machines (IBM) and Intel (INTC) shares both fell in the pre-market after disappointing investors with their first-quarter performance. IBM beat earnings expectations, but revenue stayed flat, below Wall Street's expectations. The weak European economy weighed down on the company's revenue, but Asian, North American, and emerging markets improved. Big Blue's sales in the BRIC countries rose 10% as a group. Intel forecasts lower profit margins than analysts expected as the chip maker invests in overhauling and future-proofing older factories. Intel is also investing in new technology that will give it a toehold in the mobile computing arena.

Warren Buffett will stay in charge of Berkshire Hathaway (BRK-A) (BRK-B) despite being diagnosed with prostate cancer. Buffett says that his cancer is not life-threatening and won't interfere with his ability to do his job.

Twitter: @vincent_trivett
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