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Pre-Market Primer: A European Banking Union Might Become a Reality


Germany might loosen its objection to shared banking oversight, but Merkel's answer to eurobonds is still "nein."

MINYANVILLE ORIGINAL European and Asian markets continue to sell off today and US stock futures are up slightly ahead of the factory orders report.

At 8:30 a.m. EDT, Dow (^DJI) futures were virtually unchanged, up 0.02% at 12,105.00. S&P 500 (SPY) futures were up 0.27% at 1,277.30 and Nasdaq (^IXIC) futures rose 0.31% to 2,462.50.

Factory orders in April rose only 0.1%, according to a consensus of economists. March orders declined by 1.5%. The Commerce Department will release this indicator at 10:00 a.m. today.

Britain's markets are closed, vastly reducing global trading volume. European stocks are down again amidst mixed news for the future of the euro. Spanish Prime Minister Mariano Rajoy has endorsed ECB President Mario Draghi's plan for a more consolidated banking union.

"The EU needs to reinforce its common institutional architecture so that investors regain confidence in the single currency," Rajoy said, adding that Spain has done everything it could to increase liquidity. "Spain will emerge from the storm through its own efforts and with the support of our European partners."

"We are not on the edge of a precipice," he said.

Presently, European authorities are saving troubled banks by funneling money into national governments. Draghi hopes that sharing this responsibility will unyoke sovereign yields from banking sectors. Germany is hinting that it might drop its strong opposition to any shared fiscal power. Provided that other European governments are also willing to transfer power to Europe, Germany will drop its opposition to common support for the banking sector. Chancellor Angela Merkel, however, rejected Francois Hollande's proposal of the prospect of common borrowing for the eurozone.

Merkel said that some "come along and ask for eurobonds, saying all we need are equal interest rates and everything will turn out alright," adding that she will support such a plan "under no circumstances."

Meanwhile, Portugal will be injecting 6.65 billion euros into three of its troubled banks.

China's service sector growth weakened in May. Non-manufacturing PMI fell to 55.2 from 56.1, the lowest reading since the National Bureau of Statistics started seasonally adjusting the data in March 2011.

Facebook (FB) is looking for a new high-growth market to sustain its rapidly growing user base. Since getting China on the social network has been difficult, the company is considering letting children under 13 join. Millions of kids are already using Facebook by lying about their ages.

Court documents showed that Bank of America (BAC) executives -- including CEO Ken Lewis -- were aware of the weaknesses on Merrill Lynch's balance sheet from mortgage losses, but withheld that information from shareholders as they approved the $50 billion acquisition of the brokerage 2008.

Twitter: @vincent_trivett
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