European stocks fell yesterday as Spanish bond yields climbed and investors awaited the results of banking stress tests from the Mediterranean country. US index futures dropped, while Asian shares were little changed.

The Stoxx Europe 600 Index declined 0.3% at 11.18am in London. The gauge has still rallied 7.8% so far this quarter, heading for the biggest rally in 2012, as global central banks expanded stimulus.

The midday downturn reversed a strong opening for most European bourses, following Thursday’s release of the 2013 Spanish budget, which focused on spending cuts and economic reform on Thursday.

Spain announced its budgetary measures for 2013 on Thursday which will see the government pass 43 new laws to reform the economy over the next six months and increase spending cuts rather than taxes. Investors will be looking to the results of an audit of Spanish banks during the day that will reveal the amount needed to recapitalise the country’s beleaguered banks.

In France, President Francois Hollande yesterday announced his country’s 2013 budget plans.

In stocks news, basic resources, technology and chemicals were the sectors with the most gains.

Japanese stocks retreated, with the Topix Index falling to a two-week low, after industrial production missed estimates, signalling a worsening outlook for manufacturers as the global slowdown deepens. The Topix lost 1.1% while the Nikkei 225 Stock Average fell 0.9% after rising as much as 0.4%.

The Indian government left the target for debt sales in the second half of the fiscal year unchanged after stepping up efforts to pare its budget deficit.

Oil climbed for a second day in New York and headed for the biggest quarterly gain this year before a report forecast to show personal spending rose in the US, signalling an economic recovery that may boost fuel demand.