Stock Futures Fall as Concerns Mount Over Italy

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Stock-index futures were in the red on Monday as mounting political instability in Italy threatened to derail much-needed economic reforms in the euro zone's third-biggest economy, overshadowing positive developments from Greece. 

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As of 8:40 a.m. ET, Dow Jones Industrial Average futures slid 50 points to 11,891, S&P 500 futures slipped 7 points to 1,244 and Nasdaq 100 futures slumped 7.5 points to 2,344. 

The drama sparked by Europe's deepening sovereign debt crisis that has driven Wall Street higher and lower in recent weeks appears poised to continue on Monday.  

Greek leaders were able to forge an agreement to form a national unity government on Sunday in which current Prime Minister George Papandreou will step down and both the ruling party and the opposition would be represented.  The deal would see the unity government running the embattled nation until it receives a crucial bailout from international lenders, including the European Union, at which point elections would be called to pick out a new leader.  The agreement and the enacting of measures to receive billions of euros in rescue aid would stave off a bailout that market participants had feared would damage European banks, and potentially the global economy. 

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However, the crisis that started in the periphery of the euro zone may already be spreading straight into the 17-member currency bloc's core.  Italy has seen its public debt balloon to 119% of its economic output in 2010 from 106% in 2008, raising the specter that it too may need assistance if it doesn't quickly enact reforms aimed at shrinking its public sector.  However, Italian Prime Minister Silvio Berlusconi has seen his majority in parliament teeter, paralyzing his ability to push the reforms through the country's lawmaking body in a time when the European Union is ramping up pressure to enact the changes.  

As a result of the tumult, the return investors demand to purchase the country's benchmark 10-year note surged to the highest level since the formation of the euro, according to an analysis by FOX Business.  That compounds the problem because higher yields make it pricier for the country to borrow in the private market. 

European blue chips fell 0.46%, while the euro slid 0.57% to $1.375. The U.S. dollar rose 0.2% against a basket of six world currencies. 

On the U.S. front, the economic calendar is light on Monday, with a release from the Federal Reserve on consumer credit conditions slated for release in the afternoon. 

Energy markets held on to gains despite a strengthening U.S. dollar. 

The benchmark American crude oil contract rose 39 cents, or 0.42%, to $94.67 a barrel.  Wholesale RBOB gasoline rose 3 cents, or 1%, to $2.69 a gallon. 

Gold climbed $19.90, or 1.1%, to $1,776 a troy ounce. The yield on U.S. government debt was modestly lower.  The benchmark 10-year Treasury yields 2.034% from 2.040%. 

Foreign Markets 

European blue chips fell 0.46%, the English FTSE 100 slid 0.62% to 5,493 and the French CAC 40 slipped 0.27% to 5,950. 

In Asia, the Japanese Nikkei 225 dropped 0.39% to 8,767 and the Chinese Hang Seng slumped 0.83% to 19,678. 

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