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Premarket: Futures rally on EU agreement ahead of U.S. data

Traders at work on the floor of the New York Stock Exchange, June 20, 2012.

Brendan McDermid/Reuters

U.S. stock index futures jumped on Friday after euro zone leaders agreed to allow rescue funds to be used to stabilize the region's banks.

Details of the agreement, which includes the creation of a single supervisory body for euro area banks, remain to be worked out. Still, Italian and Spanish borrowing costs fell as market expectation for any action during a two-day European Union summit had all but vanished.

"We've gotten used to being underwhelmed by the outcomes so with little-to-no expectations for success, the fact that it appears we are going to get something substantial is a real important positive for the market in the near term," said Art Hogan, managing director of Lazard Capital Markets in New York.

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"It's inching closer to a banking union and the closer we get to a banking union would put (the EU) well on the road to a fiscal union."

Financial stocks could attract the most buyers in U.S. markets as the risk of exposure to their European peers diminishes. The Select Sector Financial SPDR rose 1.6 per cent in premarket trading.

A more than 1 per cent jump in the euro against the U.S. dollar could also entice investors into commodity-related sectors like basic materials and energy. The Select Sector Energy SPDR added 1.6 per cent.

Equities and other risky assets have recently been weighed down by concerns that stubbornly high borrowing costs in Spain and Italy could force the fourth- and third-largest economies in the bloc to seek bailouts.

S&P 500 futures jumped 20 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 131 points, and Nasdaq 100 futures added 35 points.

The steep gains trimmed a quarterly decline in S&P futures to about 4 per cent. Futures have, so far, gained 2.5 per cent in June.

The U.S. Commerce Department releases personal income and consumption data for May at 8:30 a.m. EDT (1230 GMT). Economists in a Reuters survey expect a 0.2 per cent rise in income and an unchanged reading in spending.

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The Institute of Supply Management Chicago releases its June index of manufacturing activity at 9:45 a.m. (1345 GMT). Economists forecast a reading of 52.5 compared with 52.7 in May.

The Thomson Reuters/University of Michigan Surveys of Consumers final June consumer sentiment index is due at 9:55 a.m. (1355 GMT), with economists looking for a reading of 74.1, a repeat of the preliminary June figure.

The market could be volatile and see higher volumes as managers square their positions as the second quarter ends. The outperformance of bonds in the past three months could trigger inflows into stocks and extend the expected rally.

U.S.-traded shares of Research in Motion tumbled 17 per cent in premarket trading in the wake of the company's decision Thursday to delay the make-or-break launch of its next-generation BlackBerry phones until next year.

Nike shares dropped 12 per cent in premarket trading, a day after the world's largest sportswear maker missed quarterly profit estimates for the first time in at least two years.

Hospitals and insurers providing Medicaid plans for the poor were the main corporate winners from the U.S. Supreme Court's decision Thursday to uphold President Barack Obama's Affordable Care Act, as they prepare to see an influx of newly insured customers with no prior access to healthcare.

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