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Pre-Market Primer: US Income and Spending Rise, Spain Falls Further


S&P downgraded 16 Spanish banks on the same day that the country confirmed that it's in a double-dip recession. Spending in the US increased, but not as much as expected.

MINYANVILLE ORIGINAL Equities futures are down today after reports that US consumer spending increased in March, but trailed gains in personal income.

Personal income in the US increased by 0.4% on a monthly basis in March, slightly more than economists expected. Spending rose 0.3%, slightly less than anticipated. Dow (^DJI) futures fell 0.15% to 13,144.00. S&P 500 (SPY) futures declined 0.25% to 1,395.00. Nasdaq (^IXIC) futures dropped 0.37% to 2,726.75.

Spain took another beating today as the government confirmed that the country is in a double-dip recession. After downgrading Spain's sovereign credit on Friday, Standard & Poor's followed up by cutting ratings for 16 Spanish banks including Banco Santander (STD). In a way, S&P acknowledges that its own actions are to blame for the banks' current position:

"The sovereign downgrade has direct negative rating implications for the banks that we rate at or above the sovereign rating on Spain, and on most banks whose ratings incorporate uplift over their 'stand-alone credit profiles' to reflect Spanish government support."

If there is a silver lining for Spain today, it is that the country contracted by just 0.3% in the last quarter, slightly less than anticipated.

Inflation in the eurozone slowed to 2.6% in April from 2.7% in March. German retail sales increased by 0.8% in March after a 1.1% decline the month before.

China is reportedly considering helping Iran solve the problem with shipping insurance that it is having. The US and Europe will tighten sanctions on importing Iranian oil in July, and several of Iran's trading partners have already pared down their relationship with Iran. Western insurers and reinsurers are already banned from covering ships carrying Iranian oil. As insurers in Asia prepare for tightened sanctions, many are scaling back coverage. China might help Iran by giving Iranian ships a sovereign guarantee.

"We are paying great attention to this, the country has the need for oil and it's our responsibility to move the crude," Zhang Shouguo, secretary general of China Shipowners' Association, told Reuters. "But we need a solution from the government so we can avoid such risk."

Oil futures fell 0.69% to $104.29/barrel this morning.

Barnes & Noble (BKS) shares surged by 100% this morning after announcing a partnership with Microsoft (MSFT) to create a new Nook spinoff. Microsoft will invest $300 million for a minority stake in the yet-to-be-named subsidiary, which will combine Barnes & Noble's Nook and college businesses. The new company will be valued at $1.7 billion.

Energy Transfer Partners (ETP) will pay $5.3 billion to acquire Sunoco (SUN). The deal represents a 29% premium for the company.

This weekend, the New York Times published an article describing how Apple (AAPL) uses tax havens such as Nevada to bring its worldwide tax rate down to 9.8%, compared to Wal-Mart's (WMT) 24%.

Jim O'Neill, Chairman of Asset Management at Goldman Sachs (GS), is being considered as a candidate for governor of the Bank of England. Current governor Mervyn King is due to retire in June 2013.

Twitter: @vincent_trivett
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