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MADRID – Spain's borrowing costs plummeted in a short-term debt auction Tuesday, indicating market confidence in the country's ability to handle its debt is recovering as conservative Mariano Rajoy prepared to take over as the new prime minister.
The Treasury said it sold euro5.6 billion ($7.3 billion), way above the euro4.5 billion it had initially sought.
Investors demanded an interest rate of only 1.74 percent to lend the government 3-month money, down sharply from 5.1 percent in the last such auction on Nov. 22. The rate for the 6-month bills was 2.44 percent, down from 5.22 percent.
Short-term credit conditions have eased significantly in recent weeks, helped by the European Central Bank's offer of ultra-cheap loans to the financial sector as well as the promise by eurozone governments to accept tighter controls on their budgets.
Spain has already made sharp austerity cuts to its national spending to convince bond investors that it will remain solvent despite the turmoil in European financial markets.
Rajoy, who was expected to be voted in as premier later Tuesday after Parliament wrapped up a two-date debate, promised more even austerity this week.
Rajoy's Popular Party won a landslide victory in Nov. 20 elections chiefly on promises to lift Spain out of its economic crisis.
He replaces Jose Luis Rodriguez Zapatero of the Socialist party, which suffered big losses in the election mainly due to its handling of the crisis.
Rajoy will formally be sworn in before King Juan Carlos on Wednesday. He is then to name his ministers and hold a first cabinet meeting Friday.
Opening the debate Monday, Rajoy gave a glimpse of his plans by promising austerity cuts worth euro16.5 billion ($21.6 billion).
Spain's borrowing costs have spiraled over the past year amid fears it might need a bailout like Greece, Ireland and Portugal.
The collapse of a real estate bubble in 2009 ushered in a near two-year recession that has left Spain with an unemployment rate of 21.5 percent — the highest in the euro-zone — as well as a swollen deficit and a stalled economy.
Rajoy said Monday he would bring in reforms to encourage companies to hire and tax breaks for small and medium-sized firms that make up the bulk of the economy. He says he will also streamline the government with a hiring freeze for most groups of civil servants.

NEW YORK (Reuters) – Stock index futures rose Tuesday, indicating equities will rebound from declines in the prior session as a drop in Spain's borrowing costs and unexpectedly positive data from Germany eased euro zone debt worries.

Short-term financing costs for struggling Spain more than halved as banks lapped up debt at an auction, with much of the purchasing power said to have come from cut-rate loans from the European Central Bank.

U.S. banks, plagued by concerns about exposure to the euro zone crisis, dragged U.S. stocks lower Monday, with losses accelerating late in the session. Bank of America Corp's (BAC.N) stock price fell below $5 for the first time in nearly three years.

Bank of America shares were up 2.3 percent to $5.10 and Citigroup Inc (C.N) added 1.9 percent to $25.30 in premarket trade.

Headlines and fluctuating bond prices out of the euro zone continued to spark high volatility. The market will be prone to large swings this week on expected low volume due to the upcoming Christmas holiday.

"We've seen pre-opening rallies dry out rather quickly as the mercurial mindset of investors dodges risk exposure," said Andre Bakhos, director of market analytics at Lek Securities in New York.

"The market is grasping for a tangible theme to take us positive into the new year with many remaining dour. An upside surprise would be the contrarian theme."

The Munich-based Ifo think-tank said German business sentiment rose sharply in December, defying expectations it would decline and underscoring the resilience of Europe's biggest economy.

The first-ever offer of three-year loans to banks from the European Central Bank on Wednesday is expected to be a strong indicator of whether debt-loaded countries get some relief or endure more pain.

S&P 500 futures climbed 12.8 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 100 points, and Nasdaq 100 futures added 26.25 points.

On the economic front, investors awaited housing starts and permits data for November. Economists in a Reuters survey forecast housing starts at a 635,000 annualized rate versus 628,000 in October. The data is due at 8:30 a.m. EST (1330 GMT).

AT&T Inc (T.N) lost 1 percent to $28.45 premarket after it dropped its controversial bid for T-Mobile USA, the Deutsche Telekom (DTEGn.DE) unit, bowing to fierce regulatory opposition.

After the close Monday, business software maker Red Hat Inc (RHT.N) forecast fourth-quarter revenue below expectations, hurt by a weaker euro.

Sempra Energy (SRE.N) said it expects to exceed its 2011 profit forecast.

(Reporting By Chuck Mikolajczak; editing by Jeffrey Benkoe)

TOKYO (Reuters) – Sony Corp shifted 321,400 units of the PlayStation Vita, its new handheld game device, in Japan in its first two days on sale, research firm Enterbrain said on Tuesday.

That falls short of rival Nintendo Co Ltd's 3DS, which sold 371,000 in its first two days, Enterbrain said. Sales of the 3DS, however, slumped weeks after the launch, forcing Nintendo to slash the price and crushing its profit outlook for the year.

Sony seeks to avoid suffering a similar fate by offering a big slate of 24 games for the Vita at launch. But executives admit the real challenge will come in maintaining sales over the next few years.

Fans in Japan lined up to be among the first to pick up the latest portable game device, which kicked off a global rollout on Saturday. The Vita will be launched in the United States and Europe in February.

Sony's previous portable game device, the PS Portable, sold 166,000 units on the first day of sales in 2004. It has sold 73 million units to date.

(Reporting by Isabel Reynolds; Editing by Chris Gallagher)

NEW YORK – Online search and advertising giant Google is teaming with investment firm Kohlberg Kravis Roberts & Co. to develop four solar energy farms serving the Sacramento Municipal Utility District in California.
Google says on its Green Blog that it will spend $94 million on the projects. They also will receive equity from SunTap Energy RE LLC, a venture formed by KKR to invest in U.S. solar projects.
The projects are expected to provide enough power for more than 13,000 average U.S. homes. Construction on three of the four projects will be complete early next year, with the fourth coming on line later in the year.
Google says it has invested more than $915 million in renewable energy projects.

OMAHA, Neb. – Food maker ConAgra Foods said Tuesday that fiscal second-quarter net income fell nearly 15 percent as high food costs continued to pressure results.
ConAgra Foods Inc., like many food companies, is dealing with higher costs for ingredients, packaging and fuel and has raised its prices to offset those increases.
"The marketplace environment remains difficult due to continuing inflationary pressures and the impact of the current economy on consumers, so we are cautious about business conditions," said CEO Gary Rodkin.
Still, results for the Omaha, Neb.-based company were better than analysts expected and ConAgra reaffirmed its fiscal 2012 guidance.
The maker of Slim Jim, Chef Boyardee and other packaged foods says net income fell to $171.8 million, or 41 cents per share. That compares with $200.9 million, or 46 cents per share a year ago. Excluding one-time items related to derivatives and restructuring, net income was 47 cents per share. That's ahead of the 43 cents per share analysts expected, according to a poll by FactSet.
Revenue during the 13 weeks ended Nov. 27 rose 8 percent to $3.4 billion from $3.15 billion last year. Analysts expected $3.34 billion.
Sales of branded consumer foods, the company's largest division that makes up 63 percent of sales, rose 4 percent to $2.18 billion.
Top sellers were Banquet, Chef Boyardee, Hunt's, Marie Callender's, Orville Redenbacher's and others.
Sales of commercial foods, which make up 37 percent of sales, rose 16 percent to $1.23 billion, as the company raised prices because of higher wheat and potato costs.
Results from its Lamb Weston potato division improved due to cost cutting and higher volume.
ConAgra's outlook sees adjusted fiscal 2012 earnings per share growth in the low- to mid-single digit percentage range, with most growth concentrated in the fourth quarter, helped by higher prices and acquisitions.