Benzinga Market Primer: Monday, June 11

Good morning on this Monday, and it is a good Monday as we wake up to see a sea of green. Stock futures and other risk assets are up overnight as the Eurogroup agreed to a bailout package of the Spanish banks overnight and Chinese data was not as bad as expected following the surprise rate cuts last week. But let us digest the news.

Overnight, we had a lot of action. On the news of the Spanish bailout (which will add about 100 billion euros of debt to its total debt, with GDP at about 1.1 trillion euros), the euro gaped higher about 150 pips at the Asian open near 1.2630, but now sits near the mid-point of that gap near 1.2560. Chinese exports rose in May at a pace that almost doubled analyst expectations, but industrial output and retail sales lagged estimates. The market had a "whisper number" that was a lot worse following the rate cuts last week.

EU's Almunia: "Spain banking bailout will have conditions." EU's Altafaj was also hinting that the interest rate on the loan to Spain will be below the market but would not be extremely low, in the 3-4% range. Lastly on the bailout, Spain's Banco Popular says it doesn't need bailout funds.

Italian final Q1 GDP revisions were released, and the print was revised to -1.4% year-over-year vs. prior estimate of 1.3% (-0.8% quarter-over-quarter). Also, OPEC President Luaibi of Iraq sees fair oil price as $100-120 per barrel USO. EU's Altafaj hinting that the interest rate on the loan to Spain will be below the market but would not be extremely low, in the 3-4% range.Spain's Banco Popular says it doesn't need bailout funds.

Markets are seeing a see of green in risk assets this morning on the back of the positive news. The euro is down to 1.2560 after reaching as high as 1.2630 at the Asian open. S&P 500 futures are up about 8 points, off the highs of overnight but still indicating a positive open. The 10-year treasury yield rose to 1.65%, up about 2 basis points. Asian shares closed higher earlier, with the Nikkei up almost 2% and the Hang Seng up almost 2.5%. European stocks are higher on the back of the strength in Asia, with Spain being the outperformer on news of the bailout and Italy the laggard.

On the agenda for today, we have a pretty empty economic calendar. This morning, we have 4-week, 3-month, and 6-month US bill auctions. With yields higher on the day today, expect the treasury to have to pay up at the auction of the very short-term paper. For those currency traders, the Bank of Japan Governor Shirakawa speaks tonight at 8 pm, and the market will look for any indication of Yen intervention FXY. Also, at 8:15 pm eastern, Charles Evans, Chicago Fed President, FOMC voting member, and recent ultra-dove is set to speak again, and traders will be looking for more dovish statements to bolster the hopes for QE3.

This week, the two most important things to watch will be Spanish bond yields and Italian bond yields (and by de facto bank stocks). The bad part of the Spanish bank bailout is that it massively increases debt-to-GDP (the bailout is about 9.1% of last year's GDP, but with GDP falling it could be a higher share). If Spanish bond yields continue to creep higher, we then know that Spain is not dealt with yet and will now need a fiscal bailout more like Greece, Ireland, and Portugal. Italian bonds and banks stocks will also need to be watched, for now Italy is the last of the PIIGS that has yet to receive a bailout. Watch for any weakness in bank stocks there and any indication of renewed pressures on the sovereign debt. Italy does not have a deficit problem nor a wealth problem, but simply a debt problem. Remember, Italy has higher wealth per capita than does Germany.