PARIS, Oct 14 (Reuters) - European stocks are set to dip on Monday as the United States edged closer to a debt default after Democrats and Republicans failed to reach an agreement over the weekend. Friday's optimism that a deal could be reached over the weekend disappeared on Saturday, although Senate Majority Leader Harry Reid and Republican leader Mitch McConnell held talks that Reid later called "substantive". Global stocks strongly rallied late last week, boosted by hopes a deal to raise the U.S. federal borrowing limit before the Oct. 17 deadline was near. At 0625 GMT, futures for Euro STOXX 50, for UK's FTSE 100, for Germany's DAX and for France's CAC were down 0.3-0.4 percent, while German Bund futures open 2 ticks lower at 139.77. "Against the backdrop of Thursday and Friday's gains, it's only a modest re-tracement and there is still the overwhelming belief that a deal will be reached by default day," Capital Spreads trader Jonathan Sudaria wrote in a note. Also rattling investors on Monday, data showed China's export growth fizzled in September to post a surprise fall, while inflation hit a seven-month high, limiting the scope for the country's central bank to manoeuvre to support the economy. Spanish banks will be in focus after sources said the lenders are considering ways to boost their capital amid fears the euro zone's imminent review of their balance sheets will force them to set aside even more cash for potential losses on restructured loans. The auto sector will also be in the spotlight after sources told Reuters PSA Peugeot Citroen is preparing a 3 billion euro capital increase in which Chinese partner Dongfeng and the French government would take matching stakes. Japanese markets were closed for a national holiday. -------------------------------------------------------------------------------- MARKET SNAPSHOT AT 0624 GMT: LAST PCT CHG NET CHG S&P 500 1,703.20 0.63 % 10.64 MSCI ASIA EX-JP 550.87 -0.2 % -1.13 EUR/USD 1.3564 0.17 % 0.0023 USD/JPY 98.24 -0.32 % -0.3200 10-YR US TSY YLD 2.691 -- 0.00 10-YR BUND YLD 1.852 -- -0.01 SPOT GOLD $1,273.30 0.05 % $0.68 US CRUDE $101.93 -0.09 % -0.09 > GLOBAL MARKETS-Asian shares fall as U.S. debt deadline nears > Wall St ends up on hopes of debt solution in Washington > FOREX-Dollar slips vs yen as U.S. debt deal remains elusive > PRECIOUS-Gold near 3-month low as U.S. debt deadline looms > METALS-London copper drifts on lack of progress in U.S. debt talks > Brent drifts towards $111 on lower Chinese exports, US budget crisis COMPANY NEWS: PEUGEOT The automaker is preparing a 3-billion-euro ($4.1-billion) capital increase in which Chinese partner Dongfeng and the French government would take matching stakes in the carmaker, people with knowledge of the matter said Friday. DASSAULT SYSTEMES The French software maker warned its third-quarter revenue and earnings would be lower than it had expected, citing sluggish orders. SPANISH BANKS Spanish banks are considering ways to boost their capital amid fears the euro zone's imminent review of their balance sheets will force them to set aside even more cash for potential losses on restructured loans, banking sources in Madrid said. ITALIAN BANKS Italy's new budget proposes to give banks and insurance companies more speedy tax breaks on loan losses and writedowns in a move that will help lenders to clean up their balance sheets. UNICREDIT Italy's biggest lender by assets may consider listing a minority stake in its German unit, HVB, should upcoming stress tests require Italy's largest bank by assets to raise more capital, magazine Der Spiegel reported, without citing sources. ALLIANZ The insurer might increase its investments in real estate, private-equity funds and wind parks to 80 billion euros ($109 billion) from 55 billion euros, Chief Financial Officer Maximilian Zimmerer told German paper Welt am Sonntag. BMW German luxury car maker BMW said it is set to sell another record number of cars in China this year, an upbeat outlook accompanied by a separate announcement that it would recall over 25,000 defective cars in the nation in 2014. ALITALIA AIR FRANCE-KLM Shareholders of Alitalia will vote on Monday on a 300 million euro capital increase to keep the near-bankrupt Italian airline flying, but the participation of top investor Air France-KLM is far from certain. CAMFIN, PIRELLI The takeover bid launched by Lauro 61, a vehicle created by a group of investors led by Pirelli's Chairman Marco Tronchetti Provera, over Pirelli holding Camfin, won nearly 96 percent of acceptances, the vehicle said on Friday. BANCA POPOLARE EMILIA ROMAGNA Italian cooperative bank Banca Popolare dell'Emilia Romagna (BPER) expects growth in problem loans to slow and writedowns to drop in the second half of 2013, its chief executive Luigi Odorici said on Friday. EDF Britain is "extremely close" to sealing a deal with EDF Energy to build the country's first new nuclear power station since 1995, Energy Minister Ed Davey said on Sunday, adding there was also Chinese involvement in the talks. SANOFI The FDA has approved over-the-counter Nasacort allergy spray to treat hay fever and nasal allergies.