Today's Headlines

Bloomberg:

• Greece Faces Pressure to Pass Deficit Cuts as EU Leaders Meet in Brussels. Greece’s government and opposition came under pressure to unite behind deficit-reduction measures to secure a 12 billion-euro ($17 billion) payout to avert the euro area’s first default. As the government pushed new budget cuts in Athens, European leaders sent a two-pronged message from Brussels, calling for an end to partisan bickering over austerity while promising to save the debt-wracked country from bankruptcy. “We will ask the leaders and citizens of Greece to rise to the occasion and do what must be done,” Dutch Prime Minister Mark Rutte said today before a two-day European summit in Brussels. “A nation undivided, focused and fully committed will not be abandoned.” Bonds fell in Greece, Ireland, Portugal and Spain and the euro weakened on concern that European governments have failed to get a handle on the debt crisis, even with 256 billion euros in emergency loans. Greece’s parliament votes on a new austerity package next week after Prime Minister George Papandreou survived a confidence motion yesterday, without support from the opposition. The Greek opposition leader, Antonis Samaras, defended that stance in meetings with fellow European conservatives in Brussels today. While in favor of budget cuts, he lashed out at the “current policy mix” for too much reliance on tax increases.
• Sovereign Credit Risk Increases to Record in Europe, Default Swaps Show. The cost of insuring against default on Portuguese sovereign debt surged to a record, driving a benchmark gauge of credit-default swaps on the region’s government debt to an all-time high. Swaps on Portugal climbed 42 basis points to 824, and the Markit iTraxx SovX Western Europe Index of contracts on 15 governments jumped 16 basis points to 240 at 2:30 p.m. in London. Swaps on Greece rose 63 basis points to 2,050, signaling an 83 percent chance of default within five years, according to CMA. Ireland increased 40 to 795 and Spain rose 21.5 to 306.5, while Italy was 10.5 higher at 199 and Belgium was up 15 at 167. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings increased 12 basis points to 422, the highest since Jan. 11, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 3.75 basis points to 114 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 5.5 basis points to 168.5 and the subordinated index climbed 7 to 297.
  
• Reserves Tapped, Oil Price Plunges to 4-Month Low. Oil tumbled to the lowest price in four months after the International Energy Agency said its members would release crude from strategic reserves. Oil fell as much as 6 percent as the agency announced the release of 2 million barrels a day for 30 days beginning next week to help make up for a Libyan supply disruption. Oil for August delivery dropped $4.31, or 4.5 percent, to $91.10 a barrel at 11:32 a.m. on the New York Mercantile Exchange. Earlier, futures touched $89.69, the lowest level since Feb. 22. Prices have gained 19 percent in the past year. It’s only the third time in the history of the IEA the global reserves have been tapped. The first was during the 1991 Persian Gulf War, and the second was after Hurricane Katrina in 2005. The Paris-based IEA is an energy policy adviser to 28 industrialized nations including the U.S., Japan and Germany. “In what appears to have been a well-coordinated strategy involving key IEA countries and key Arab oil producers holding surplus production policy, it would appear that officials in the main oil exporting and importing countries are combining their efforts to replace the 132 million barrels of light, sweet, Libyan crude lost since late winter,” Morse and Doshi said in their report.
• Jobless Claims Rise, Confidence Falls. More Americans than forecast filed first-time jobless claims last week and consumer confidence fell, highlighting Federal Reserve Chairman Ben S. Bernanke’s concern that the slowdown in the economy may persist. Applications for unemployment benefits increased 9,000 in the week ended June 18 to 429,000, Labor Department figures showed today. The level of claims exceeded the highest estimate in a Bloomberg News survey in which the median projection called for 415,000 filings. The Bloomberg Consumer Comfort Index dropped to minus 44.9 last week from minus 44.
• Europe Services, Manufacturing Weaken More Than Forecast. European services and manufacturing growth slowed more than economists forecast in June, adding to signs that the economy is losing some momentum. A composite index based on a survey of euro-area purchasing managers in both industries fell to 53.6 from 55.8 in May, London-based Markit Economics said today. Economists had forecast a drop to 55.2, the median of 16 estimates in a Bloomberg survey showed. A reading above 50 indicates growth. Output growth weakened to the slowest in almost two years.
• Off-Balance Sheet Lending Pumps Up Default Risk: China Credit. Chinese banks helped arrange 320 billion yuan ($49.5 billion) of loans between companies in the first quarter that weren’t recorded in the lenders’ balance sheets, raising the risk on their bonds to a nine-month high. While global financial regulators are requiring more transparency and the People’s Bank of China restricts credit to cool inflation, lenders have increased the off-balance sheet loans by 110 percent, central bank data show. Credit-default swaps on Bank of China Ltd. are on course for their biggest monthly rise in a year and are the most expensive since September, according to data compiled by Bloomberg. The so-called entrusted loans are kept off balance sheets as in theory the bank is a middleman and bears no direct credit risk. When a company borrows and lends the funds on to firms for a profit, the financial institution could still face liabilities. Companies are charging firms interest of as much as 21 percent, three times higher than the benchmark one-year lending rate of 6.31 percent, stock exchange filings show. “Some of the borrowers with low credit quality, which can never or should never get bank credit, get levered through entrusted loans, which increases the overall leverage of the economy,” said Winnie Wu, an analyst at Bank of America Merrill Lynch in Hong Kong. “If there is a credit downturn or liquidity crunch those things could easily go bust, and the effect will come back to haunt the banking system.” More than 40 percent of borrowers on entrusted loan deals announced since January 2010 have been property developers facing lending curbs intended to control inflation, according to Bank of America Merrill Lynch research.
• China, India, Brazil Back France's Plan to Tackle 'Plague' of Food Prices. China, India and Brazil were among Group of 20 countries that backed new rules for global agriculture at a meeting in Paris today, France said. Farm ministers from the U.S., the U.K., Australia and Argentina hadn’t stated their positions on the plan yet, French agriculture ministry spokesman Bertrand Sirven said in a briefing at a meeting of G-20 agriculture ministers in Paris. France, the current G-20 president, has proposed a central database on crops, limits on export bans, international market regulation, emergency stockpiles and a plan to raise global output. Food price swings are a “plague” on farmers and consumers that cause poverty and hunger, French President Nicolas Sarkozy said yesterday. Sarkozy called on G-20 farm ministers to act in unity, saying “the world can wait no longer” after the surging cost of food “plunged 44 million people into poverty.” World food prices tracked by the United Nations’ Food and Agriculture Organization have risen 37 percent in a year.
• Emerging Market Put Volume Rises to Double Average on One Trade. Trading of options to sell emerging market stocks rose to double the four-week average in the U.S. boosted by a single trade by an investor enlarging a bearish position. Put volume on Russian equities surged. More than 364,000 puts to sell the iShares MSCI Emerging Markets exchange-traded fund changed hands, 3.6 times the number of calls to buy, as of 2:25 p.m. in New York. The ETF dropped 1.4 percent to $45.01, the lowest intraday level since March. The investor sold 50,000 July $47 puts, using the proceeds to purchase 50,000 July $42 puts and the same number of July $43 puts, strategists at Susquehanna Financial Group LLLP in Bala Cynwyd, Pennsylvania, wrote in a report.

Wall Street Journal:

• John Paulson Also Is Taking a Bath on Gold Mining Stocks. The $5 Billion Man just can’t catch a break. John Paulson, the prominent hedge-fund manager who scored a $5 billion payday last year, has suffered further losses in two key funds of his $38 billion Paulson & Co. The $9 billion Advantage Plus fund has lost about 15% so far this month, through June 17, leaving it down 20.9% for the year, according to an investor briefed on the performance. Meanwhile, Paulson’s Enhanced Partners fund, which had been on a winning streak until recently, has lost more than 8% so far this month, through June 17, leaving it up about 2% this year. Both funds lost about 1.5 percentage points in the week ending June 17. This year, Paulson has been whacked in part by his big slugs of financial stocks such as Citigroup and Bank of America, whose share prices are down 16.5% and 19% respectively so far this year. The hedge fund also has suffered about $500 million in losses on its investment in Chinese forestry company Sino-Forest Corp., according to people close to the matter. Sino-Forest’s stock price has tumbled about 80% since late May amid allegations of questionable accounting, which the company has denied. The gold fund tripped up in May, according to one investor, closing the month up less than 2% for the year. And so far this month, some of the firm’s large investments in stocks of gold miners, including AngloGold Ashanti Ltd. and Gold Fields, are struggling. Paulson & Co., for example, held more than 41 million American depositary receipts of AngloGold Ashanti, a South African gold mining company, based on his most recent public disclosures as of March 31. At the beginning of May, the AngloGold investment – one of the biggest in Paulson’s portfolio – had a market value of $2.1 billion. Based on Wednesday’s closing prices, the investment has lost $317 million in value since then. AngloGold Ashanti Ltd. is down 7% so far this month. Share prices of two other significant mining investments for Paulson, Gold Fields and Centerra Gold, have slipped 11.6% and 10.5% so far in June, respectively.
• Dallara: Bondholders' Bailout Role a 'Challenge'. Charles Dallara, managing director of the Institute of International Finance, said it's going to be harder to find a way to involve private bondholders in a new bailout for Greece than it was to design Brady bonds two decades ago to encourage banks to make debt concessions to Latin American governments.
• Cantor Pulls Out of Biden-Led Budget Talks. House Majority Leader Eric Cantor Thursday said he was pulling out of the bipartisan budget talks headed by Vice President Joe Biden for now because the group has reached an impasse over taxes that only President Barack Obama and Speaker John Boehner (R., Ohio) could resolve. Mr. Cantor, in an interview after a negotiating session he described as bitterly contentious, said he would not be attending Thursday's scheduled meeting of the bipartisan deficit-reduction leadership group because he believed it was time for the negotiations to move to a higher level. "We've reached the point where the dynamic needs to change,'' Mr. Cantor said. "It is up to the president to come in and talk to the speaker. We've reached the end of this phase. Now is the time for these talks to go into abeyance."
• FTC to Serve Google(GOOG) With Subpoena in Broad Antitrust Probe. The U.S. Federal Trade Commission is poised to serve Google Inc. with civil subpoenas, according to people familiar with the matter, signaling the start of a wide-ranging, formal antitrust investigation into whether the search giant has abused its dominance on the Web.
  

MarketWatch

• Retailers Bucking Downward Trend. Retail stocks were bucking the downward trend of the broader markets Thursday, with some key names in the sector posting modest gains.

Business Insider:

• Apple(AAPL) Will Sell 14.4 Million iPads In Q3, According To CLSA. Apple could sell over 14 million iPads in the third quarter of this year, according to Asian investment firm CLSA. It took a look at LCD screen shipment data to come up with its estimate. The consensus for Q3 iPad sales is much less than 14 million. Here's the CLSA note:

Zero Hedge:

• China Hard Landing Bets Rise as It Now Costs More To Bet On Renminbi Strength Than Weakness. (graph)
• Greece Tensions Escalate as Labor Unions Call For Two Day General Strike on June 28-29 to Celebrate Austerity Vote.
• Number of European Banks Resorting to 1 Week ECB Liquidity Jumps to Two and a Half Year High. (graph)
• Flip Flop Roundtrip: Goldman(GS) Cuts Brent Price Target, A Month After Hiking, A Month After Cutting.
  

Insider Monkey:

• David Tepper Got a Huge Gift From IEA, Airlines Soar.

Politico:

• Senate Dems: Long Live The 'Czars'. Senate Democrats on Thursday knocked down the latest GOP effort to unseat the Obama administration’s policy “czars.” The chamber voted 47-51 to defeat an amendment from Sen. David Vitter (R-La.) to strip the salaries of czars currently working in the White House and would block the president from appointing more without Senate approval. Two moderate Democrats — Sens. Joe Manchin of West Virginia and Ben Nelson of Nebraska — broke rank to endorse the measure.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Thirty-eight percent (38%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -15 (see trends).

Financial Times Deutschland:

• The European Banking Authority has stiffened criteria in stress tests and is demanding lenders to consider the possibility of default of Greek government bonds.

YLE:

• Finnish Prime Minister Jyrki Katainen warned that the European financial crisis could widen into a new recession. "The economic situation in Europe has not gone in the right direction and the risks of a serious financial crisis and the beginning of a new recession are very large at the moment," Katainen said.

Kathimerini:

• Officials form the European Union and IMF assessing Greece's efforts to cut its budget deficit have expressed doubts about the viability of $5.4 billion of measures slated for this year. The officials are also pushing for the reintroduction of measures, such as a reduction in the income tax threshold, dropped by former Finance Minister George Papaconstantinou after pressure from lawmakers in the ruling Pasok party.

Shanghai Daily:

• China Mobile Likely to Roll Out iPhone. CHINA Mobile is expected to offer iPhone, likely a 4G version, on its network in September, sources said yesterday. "A new iPhone with China Mobile's network will debut and the cooperation will be announced in September," China Mobile's Beijing-based marketing official Liu Yang said on his microblog yesterday. "People will not need to change their mobile numbers to use iPhone."