Today's Headlines

Bloomberg:

• Greek Bailout Enters Homestretch as European Leaders Race to Avert Default. European finance chiefs are divided on how to involve private investors in a second bailout for Greece and stave off the euro area’s first sovereign default without running afoul of the European Central Bank. “You can’t leave the profits with the banks and make the taxpayers shoulder the losses,” Austrian Finance Minister Maria Fekter told reporters in Brussels today before an emergency meeting on Greece. “Ministers have different positions,” she said. “We’ll put them on the table and look at where the compromise lies.” Yields on 10-year Greek bonds touched 17.46 percent today, a record in the 17-nation euro-area’s history. The slump pushed the extra yield, or spread, that investors demand to hold the country’s 10-year bonds instead of similar maturity German bunds to a record. “Greece will default; it’s a question of when, rather than if,” said Vincent Truglia, managing director at New York-based Granite Springs Asset Management LLP and a former head of the sovereign risk unit at Moody’s. “It’s a basic solvency issue rather than a liquidity issue. Only a debt writedown will do.”
• China Raises Reserve Ratio After Industrial Production Outpaces Estimates. China ordered lenders to set aside more cash as reserves after inflation accelerated to the fastest pace in almost three years in May and industrial production rose more than estimates. A half percentage point increase announced by the central bank today and effective June 20 will take the ratio to a record 21.5 percent for the biggest lenders. The move was hours after data showing the inflation rate climbed to 5.5 percent. Signs the world’s second-biggest economy is maintaining momentum after increases in borrowing costs and curbs on real estate may have encouraged policy makers to add to tightening measures. China’s interest-rate swaps surged and bonds slumped after the central bank announcement. Today’s reserve-ratio increase “was quite a surprise but the central bank may be concerned about rising inflation expectations,” said Lu Ting, a Hong Kong-based economist with Bank of America Merrill Lynch. “It may also indicate that there have been inflows of foreign exchange especially from the trade surplus which was above $10 billion in April and May.” Still, the pace of inflation remains the slowest of the so-called BRIC nations, with the latest data showing annual rates of 6.6 percent for Brazil, 9.6 percent for Russia and 9.1 percent for India. China’s peak this year may be “slightly above” 6 percent in June, Bank of America said. Food prices in China rose 11.7 percent in May from a year earlier as pork costs surged and vegetable prices rebounded late in the month, the statistics bureau said today. “Inflation pressure is still large,” Li Daokui, an academic adviser to the People’s Bank of China, said on his microblog today. “My personal view is that the policy focus should be on considering raising the deposit rate to adjust inflation expectations.” China’s producer prices rose a more-than-estimated 6.8 percent in May and non-food inflation accelerated to 2.9 percent, the fastest pace in at least six years, today’s data showed. Fixed-asset investment excluding rural households expanded 25.8 percent in the first five months of the year, up from 25.4 percent in January-through-April. The government is weighing the threat to growth from tightening measures against the danger that rising food and housing costs may fuel social instability. In March, Premier Wen Jiabao said a combination of inflation, corruption, and the gap between rich and poor could “even affect the government’s hold on power.”
• China Inflation Heading for 6% Shows Danger for Wen Extending Rate Pause. China’s inflation pressures have yet to be contained by four interest-rate increases since September, underscoring the danger of any extended policy pause as bad weather threatens to further drive up food costs. “There’s still a long way to go” to contain prices, Shen Jianguang, chief economist for greater China at Mizuho Securities Asia Ltd. said in a Bloomberg Television interview. “We need to see a slowdown in the economy,” said Shen, who previously worked for International Monetary Fund. He predicts two more rate increases this year.
• U.S. Retail Sales Fall on Weak Auto Demand. Sales at U.S. retailers fell less than projected in May, showing consumers were weathering elevated gasoline costs. The 0.2 percent decrease reported by the Commerce Department in Washington today compared with the median forecast for a 0.5 percent drop in a Bloomberg News survey of economists. Excluding the biggest slide in auto sales in more than a year, purchases climbed 0.3 percent.
• U.S. Wholesale Prices Rose .2% on Plastics, Fuel, Textiles. Wholesale costs in the U.S. rose more than forecast in May, led by higher prices for fuel, plastics and the fastest rise in 30 years for apparel and textile costs. The costs of apparel and other fabricated textile products rose 1.0 percent in May, the fastest since 1.3 percent in April 1981. “Consumers don’t have the income to sustain the higher food and energy prices, so they’re going to cut back on spending elsewhere,” said economist Neil Dutta at Bank of America Merrill Lynch in New York after the report. “When you have five people competing for every job, wages are going to remain very weak, and that’s what ultimately drives inflation.” Compared with a year earlier, companies paid 7.3 percent more for goods last month, the fastest rise since September 2008.
• Noyer Says Any Greek Default Would Mean Financing Whole Economy. European Central Bank Governing Council member Christian Noyer said any attempt by euro-area governments to adjust Greek debt that resulted in a default would mean financing the nation’s entire economy. “Our position is extremely simple: if there is a solution that avoids a risk of default, it seems suitable,” Noyer told journalists in Paris today. “If you can’t find it, it’s better to avoid touching the debt. If despite everything you try to reduce the debt and you provoke a risk of default, you’ll have to finance the entire Greek economy.”
• India Inflation Quickens to 9.06%, Adding Pressure on Rates. India’s inflation exceeded analysts estimates, adding pressure on the central bank to extend the fastest round of interest-rate increases among Asia’s major economies. Bond yields and the rupee gained. The wholesale-price index rose 9.06 percent from a year earlier after an 8.66 percent jump in April, the commerce ministry said in a statement in New Delhi today. The median estimate of 22 economists in a Bloomberg News survey was for an 8.74 percent increase. The Indian economy may be “overheating” and further rate rises are warranted, Nouriel Roubini, co-founder and chairman of Roubini Global Economics LLC said yesterday, as well as calling for similar action in China. The Reserve Bank of India may boost borrowing costs June 16 for the 10th time since mid-March 2010, 15 of 17 economists in a Bloomberg News survey said. “Inflation is a big worry and policy makers’ objective would be to fight the price gains rather than worry about growth,” Samiran Chakraborty, Mumbai-based chief economist at Standard Chartered Plc, said before the report.
• Saudi Aramco Said to Offer More Oil to Asia, Europe Refiners. Saudi Aramco, the world’s largest oil exporter, has offered additional crude supplies to customers in Asia and Europe, according to people at six refiners who received the proposals. The Dhahran-based company offered extra cargoes for delivery later this year.
• U.K. Inflation Holds at Fastest Pace Since 2008; Weale Seeks Rate Increase. Consumer prices rose 4.5 percent in May from a year earlier, matching the increase recorded in April and the median forecast of 30 economists in a Bloomberg News survey, the Office for National Statistics said today in London.
• Best Buy's(BBY) Profit Tops Analyst's Estimates After Smartphone Sales Increase. Best Buy Co., the world’s largest consumer electronics retailer, reported first-quarter profit that exceeded analysts’ forecasts, helped by rising demand for smartphones. Net income fell 12 percent to $136 million, or 35 cents a share, in the quarter ended May 28, the Richfield, Minnesota- based company said today in a statement. Analysts predicted 33 cents, the average estimate in a Bloomberg survey. The shares climbed the most in 15 months.
• Nokia(NOK), Apple(AAPL) Reach Patent Deal, Settle Lawsuits. Nokia Oyj (NOK1V) won an almost two-year patent dispute with Apple Inc. (AAPL), in a settlement that awards a one-time payment and royalties to the Finnish handset maker. Nokia rose as much as 4.1 percent in Helsinki trading.
• J.C. Penney(JCP) Names Apple(AAPL) Store Builder as New CEO.
• Optimism of U.S. Chief Executives Fell in Second Quarter on Sales Outlook. Optimism among U.S. chief executive officers fell in the second quarter from a record high as fewer business leaders projected sales will climb, a survey showed. The Business Roundtable’s economic outlook index decreased to 109.9 for the April through June period from a 113 reading in the previous three months that was the highest in data going back to 2002, the Washington-based group said today.
• Soros Says China Missed Window to Stem Prices. China has missed its opportunity to stem inflation and may now risk a hard landing, billionaire investor George Soros said. The world’s second-largest economy is in a “bit of a bubble,” Soros, 80, said today at a conference in Oslo. There are some signs that China is “losing control,” he said. China’s formula for steering its economy is “running out of steam,” Soros said, adding the country is seeing the beginnings of wage-price inflation. At the same time, efforts to restore growth in the U.S. and Europe have failed to address underlying imbalances and the global economy is not “out of the woods at all,” Soros said. Banks have “not been properly recapitalized” and “underlying imbalances have not been corrected,” he said. Recovery prospects are being hampered by the fact that the “authorities are not providing a solution,” he said. Soros said economic turmoil in the developed world is prompting him to turn to Africa, a region he called a “very attractive area to invest in,” adding he is “very much engaged” there.

Wall Street Journal:

• Chinese Police Restore Order to Restive Town. The deployment of thousands of riot police armed with tear gas and shotguns appeared to have restored order to this southern Chinese town after days of severe rioting, but both migrant workers and a government think tank warned unrest could flare again if leaders fail to address migrants' concerns. This jeans-manufacturing center in the southern province of Guangdong, which accounts for about one third of China's exports, is the site of the latest in a wave of violent protests in urban areas over the last three weeks that is challenging the Communist Party's ability to control society.
• Hedge Funds Shun Short-Selling as EU Regulations Loom - ISLA. Hedge funds are short-selling fewer stocks and securities amid continued uncertainty over coming European Union regulations, Kevin McNulty, chief executive of the International Securities Lending Association, said Tuesday. He told reporters at a briefing that the prospect for hedge funds of having to disclose their short positions publicly, and the knock-on consequences that can include other funds copying their strategies, has curtailed borrowing volume since the financial crisis, to around $1.8 trillion in outstanding borrowed securities, from around $4 trillion.
• Nine Dragons Shares Hit as S&P Pulls Rating. Shares of a Hong Kong-listed packaging manufacturer controlled by one of China's richest entrepreneurs plunged after Standard & Poor's made the unusual decision to withdraw its long-term corporate credit rating for the company's debt, citing "insufficient access" to management. S&P's decision, which pushed shares of Nine Dragons Paper (Holdings) Ltd. 17.4% lower before trading was halted midafternoon, came amid heightened concerns over transparency and governance issues at some overseas-listed Chinese firms. In a statement, S&P referred to the company's "aggressive debt-funded growth appetite." Without sufficient access to management, the ratings firm "cannot fully understand the company's strategy and financial management or assess its future credit risks," it added.
• Bernanke Calls for Debt Plan. Federal Reserve Chairman Ben Bernanke Tuesday renewed his call for politicians to come up with a plan to contain the growing U.S. public debt soon, but once again warned about the dangers of using the debt ceiling as a bargaining chip in the negotiations.
  

CNBC.com:

• 'Bumbling' Economy Result of 'Meddling' From Leaders: Ross. The U.S. economy is just "bumbling along" and creating an uncertainty among business that is likely to stifle hiring and growth, investor Wilbur Ross said.

Business Insider:

• Welcome to Thames Town, The Chinese Ghost City That Looks Like It Was Plucked From The English Countryside. (pics)
• The House Just Voted to Cut Off Funding For The Libyan War.
• Small Business Optimism Just Fell to 8-Month Low, Hiring Plans Plunge. (graph)
  

Zero Hedge:

• CFTC Delays Swaps Regulation by Another 6 Months to Comply With Wall Street Demands. One year after the passage of Dodd-Frank's provisions on swap regulation absolutely nothing has been implemented. And judging by the just announced yet another 6 month delay of rule implementation, it now appears pretty much certain that the $600 billion derivatives market will never be actually regulated, courtesy of conflicted interests at the CFTC.

CNN Money:

• Exclusive: New Stock Rules Proposed. Private companies may be allowed to stay private longer. Congress may soon change the law that is compelling Facebook to go public in early 2012, Fortune has learned. Reps. David Schweikert (R-AZ) and Jim Himes (D-CT) are among those who plan to introduce a bill that would amend the Securities Exchange Act of 1934. According to a draft copy, it would:

njherald.com:

• New Jersey Democrats Introduce Bill to Stop State From Killing Regional Greenhouse Gas Initiative. The effort to kill New Jersey's Global Warming Solutions Act and any involvement in the Regional Greenhouse Gas Initiative by the governor and Sussex County lawmakers was challenged Monday by House Democrats. Assembly Environment Chairman John F. McKeon, D-Essex and Assembly Utilities Chairman Upendra J. Chivukula, D-Middlesex introduced a resolution that would protect funding sources for clean energy and support New Jersey's membership in RGGI, a 10-state carbon emissions cap and trade program to reduce greenhouse gasses in the region 10 percent by 2018. State officials and business alliances are at odds with environmental groups and others over New Jersey's withdrawal from the multistate pact to reduce greenhouse gases blamed for global warming.

Financial Times:

• Surging Chinese Price Rises Fuel Protests. Food inflation hits 11.7 per cent in May amid upsurge in local violence.

RP Online:

• Most German banks could withstand a Greek debt restructuring, Christoph Schmidt, an economic adviser to Chancellor Angela Merkel, said. A "soft restructuring" would do little to alleviate Greece's debt burden and sooner or later creditors, including the ECB, will have to write off part of their Greek sovereign debt, Schmidt said. Such a debt overhaul for Greece wouldn't necessarily trigger contagion to Ireland and Portugal.

Xinhua:

• Beijing's average new home prices fell 4.8% in the first five months from a year earlier, citing the Beijing Municipal Commission of Housing and Urban-Rural Development.

Hexun.com:

• China may raise rates this month because negative interest rates still persist, citing Zhu Baoliang, chief economist at the State Information Center.

Alrroya Aleqtissadiya:

• Banks in the UAE had about $19 billion in bad loans at the end of April, citing the head of supervision and inspection at the central bank. Non-performing loans reached 6.67% of total loans and facilities provided by banks operating in the Gulf country at the end of April.