Markets Poised To Rally

The Toronto stock market headed for a positive open Monday after Spain admitted it needed help in recapitalising its debt-laden banks and secured a bailout for the sector.

The Canadian dollar was higher as relief over the deal pushed the U.S. dollar lower and commodities higher, up 0.17 of a cent to 97.54 cents US.

Eurozone finance ministers said Saturday they would make up to €100 billion in loans available to the Spanish government to prop up banks stuck with billions of non-performing loans and other toxic assets after the collapse of a real estate bubble. Spain has yet to say how much of this money it will tap.

Prime Minister Mariano Rajoy is avoiding using the term "bailout" to describe the aid, calling it instead a credit line without the strict austerity conditions that have accompanied bailouts for Greece, Portugal and Ireland.

However, on Monday the EU made clear the money is more than just a loan. Besides being paid back with interest, there will be strings attached for the Spanish government.

The interest rate on Spanish 10-year bonds, an indicator of investor confidence of how well Spain can maintain its debts, was down as much as eight basis points to about 6.1 per cent.

U.S. futures were positive with the Dow Jones industrial futures up 55 points to 12,558, the Nasdaq futures gained 10.2 points to 2,567.2 and the S&P 500 futures advanced 4.5 points to 1,326.5.

Prices for oil and metals advanced with the July crude contract on the New York Mercantile Exchange ahead 70 cents to US$84.80 a barrel.

July copper was up six cents to US$3.35 a pound while August bullion in New York gained $2.20 to US$1,593.60 an ounce.

With Spain taken care of for the moment, investors will now turn their attention to Greece, where voters head to the polls this coming weekend in an election likely to determine whether the debt-mired country will stick with the common currency. If Greece leaves the euro, that will raise questions of whether other countries might, too.

Relief over the Spanish bank bailout helped take some of the sting out of data from China that came out over the weekend showing the world's second-biggest economy also suffering under the weight of a rapidly slowing European economy.

China’s statistics bureau said that industrial production grew 9.6 per cent in May from a year earlier, higher than the 9.3 per cent growth registered in April. But it was lower than the 9.9 per cent gain that analysts expected.

But exports rose 15.3 per cent from a year earlier, beating 4.9 per cent growth in April and higher than the 6.9 per cent rise forecast by economists.

On the inflation front, consumer and wholesale price gains eased more than expected with the May consumer price index rising by three per cent, down from 3.4 per cent in April.

The CPI reading along with "a more-than-expected 1.4 per cent year-over-year drop in producer prices, is a clear indication that officials can focus squarely on boosting domestic demand and spurring growth and worry less about inflation," said BMO Capital Markets senior economist Jennifer Lee.

There was relief on markets last week after China's central bank cut a key lending rate by 0.25 per cent, its first rate cut in about four years.

European bourses were positive with London's FTSE 100 index ahead 0.51 per cent, Frankfurt's DAX gained 1.46 per cent and the Paris CAC 40 was up 1.1 per cent.

Earlier in Asia, Japan’s Nikkei 225 index climbed two per cent, South Korea’s Kospi added 1.7 per cent and Hong Kong’s Hang Seng added 2.4 per cent. Benchmarks in Singapore, Taiwan, mainland China, Indonesia and New Zealand also rose.

In corporate news, convenience store chain Alimentation Couche-Tard (TSX: ATD.B) has issued another warning to shareholders of Statoil Fuel & Retail who may be waiting for a higher offer. The Montreal-area company that owns Mac’s and Couche-Tard convenience stores and Circle K gas bars says it won’t pay more for the Scandinavian company. Couche-Tard’s offer values Statoil Fuel at about $2.7 billion.

Kinross Gold Corp. (TSX: K) says production has resumed at its Tasiast mine in Mauritania following a labour dispute that was resolved Saturday. The Toronto-based company has said the work stoppage was illegal. It provided no details of how the dispute was resolved in Monday's announcement.

Bailout nation gets a new member: Spain

The chase by Noah Zivitz:

We've got another bailout nation. And -- at least for now -- it looks to have won the markets' approval. Spain's euro zone partners announced Saturday they're prepared to cut a cheque for up to 100 billion euros to shore up the country's banks. A formal request is expected before euro zone finance ministers meet June 21. Spain's PM says the backstop "is a clear message that the euro project is irreversible."

Lots of questions to be answered: would 100 billion euros be enough to solve the country's real estate-induced banking crisis? How will other Euro nations already choking on austerity respond? How much of a reprieve from the markets has this won Spain, and what happens when everyone is reminded of the economic reality? What happens to confidence in the banks after Moody's imminent downgrades of some of the world's largest financial institutions? What happens after the Greek election? And is today's market reaction relief or short covering? The list goes on, and on.

If only the Euro group could bailout Holland's attack at the Euro Cup, but I digress.

China delivered its monthly data dump over the weekend, giving us some explanation for last week's rate cut by the People's Bank of China. While exports handily topped expectations, retail sales and industrial production lagged. Toss in inflation slipping to 3 percent, and we've got room to ask what the next policy moves will be in China.

The Street bursts out of the gates with analysis of all the weekend developments, with perspective from a variety of asset classes. Coverage continues throughout the morning, including the first of Howard's chats with economic and business leaders at the Conference de Montreal. At some point today, we need to hear what it all means for Canada.

Alimentation Couche-Tard is stomping on speculation it could bump its bid for Statoil Fuel and Retail. It's reiterating the current offer is the best and final bid, and the CFO says investors should consider it carefully, given market conditions.

Tim Cook takes the stage at 1 p.m. ET for his keynote at Apple's developers conference. News on next-generation software for the iPad and iPhone is expected.

Today's WSJ includes a nice wrap on investor discontent with the executive retention plan at Xstrata post-Glencore deal. The takeover plan goes to a vote July 12, and it looks like opposition is mounting. We should be hearing from a shareholder. The backlash against compensation is timely for BNN, with Headline's half hour review of pay packages today at 1 p.m. ET. Don't miss what Stephen Jarislowsky has to say.

We'll get some insight into thinking at the Fed ahead of next week's rate decision, with three voting FOMC members speaking today. It starts with the Atlanta and SF regional presidents' speeches at noon.

Residents near the site of the ruptured pipeline that sent several thousand barrels of oil into the Red Deer River are still looking for answers from Plains Midstream Canada and provincial officials. The spill is contained, but the damage might not be for the industry. Let's consider implications for the rest of the pipeline crowd.

MPs are facing a couple of sleepless nights this week, with voting set to begin on the government's omnibus budget legislation. There's talk voting could run more than 40 hours. It should be a lock for the majority government, but marathon sessions always leave room for human error when exhaustion kicks in.