Today's Headlines

Bloomberg:

• EU Vows to Rescue Greece in Exchange for Papandreou's $111 Billion Savings. European Union leaders vowed to stave off a Greek default as long as Prime Minister George Papandreou pushes through a package of budget cuts next week, pledging to do whatever it takes to stabilize the euro economy. “We have agreed that there will be a new program for Greece,” German Chancellor Angela Merkel told reporters at an EU summit in Brussels today. “This is an important decision that says once again we will do everything to stabilize the euro overall.” Greece’s next hurdle is to shepherd 78 billion euros ($111 billion) of austerity measures through parliament, after yesterday’s endorsement of the program by experts from the European Commission, the European Central Bank and the International Monetary Fund.
• Merkel Jostles With Banks on Greek Rollover. German Finance Ministry officials rebuffed a bid by bondholders for a state guarantee of new Greek securities as Chancellor Angela Merkel’s government jostled with creditors over their share of a second rescue for Greece. German banks and insurers including Deutsche Bank AG (DBK) and Allianz SE (ALV) signaled a willingness to roll over maturing Greek debt if governments offer incentives such as guarantees, said five people with knowledge of the talks. The Finance Ministry sees guarantees as a non-starter because they would undermine the aim of relieving the burden on taxpayers, a government official said. All spoke on condition of anonymity because the talks are ongoing and in private. The clash underscores Merkel’s difficulty in balancing voter interests with those of financial companies before a self- imposed July 3 deadline. They may be rendered irrelevant unless Prime Minister George Papandreou pushes through a package of budget cuts next week, the first hurdle to avert default. “Substantially all the creditors have to participate” in a voluntary debt plan for Greece, Angel Gurria, the secretary- general of the Organization for Economic Cooperation and Development, told Bloomberg Television’s Andrea Catherwood in an interview from Paris today.
• Italian Banks Lead Increase in Financial Credit Risk in Europe. Italian banks led an increase in the cost of insuring European bonds amid concern the European debt crisis may spread just as lenders face scrutiny from regulators over capital levels. Credit-default swaps on the senior debt of Unione di Banche Italiane SCPA (UBI) jumped 48 basis points to 283, according to CMA. Banca Popolare di Milano Scrl climbed 37 basis points to 295 and UniCredit SpA (UCG), whose stock was briefly suspended after breaching limits on intraday swings, rose 21 to 234. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 4 basis points to 176 and the subordinated index rose 4 to 305, according to JPMorgan Chase & Co. (JPM). The Markit iTraxx SovX Western Europe Index of swaps on 15 governments soared 5 basis points to a record 244. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings increased 5 basis points to 431. The gauge, which is headed for an eighth weekly increase, is up from about 350 basis points at the beginning of May. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 0.25 basis point to 115.5.
• Italian Bank Plunge, German Yield Spread Widens on Debt Concern. Italy’s markets watchdog said it will investigate trading in bank shares after the country’s biggest lenders posted their largest decline in two years. Part of the slump was due to automatic stop-loss trades, an official for the regulator said by telephone today. The watchdog hasn’t ruled out market manipulation. UniCredit SpA (UCG), Italy’s biggest bank, and Intesa Sanpaolo SpA (ISP), the second-largest, led lenders lower, falling 5.5 percent and 4.3 percent respectively. Both stocks were briefly suspended after breaching limits on intraday swings. Bank stocks tumbled amid concern the European debt crisis may spread just as lenders face scrutiny from regulators over capital levels. Italian 10-year bonds also fell, increasing the additional yield investors demand to hold the securities over benchmark German bunds to the most since the euro was introduced in 1999. “Contagion fears keep re-emerging as long as credible, lasting solutions in Greece are pending,” said Christian Weber, a Munich-based strategist at UniCredit.
• Euro Weakens Versus Most Major Counterparts on Greece Debt-Crisis Concern. The euro fell versus the majority of its 16 most-traded counterparts amid speculation a Greek austerity plan and a European Union pledge to stabilize the region’s economy won’t resolve its sovereign-debt crisis. “Greece concerns and Italian banks are what the market is focusing on,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto. “Everyone is just reacting to headlines. News from Europe will outweigh any economic data that comes out in the next few weeks.”
• Crude Oil Falls to Four-Month Low in London on IEA Plans to Tap Reserves. Crude oil declined in New York and reached a four-month low in London after the International Energy Agency announced the release of 60 million barrels. Futures in London tumbled 7.5 percent in two days on the IEA’s plan to respond to the drop in Libyan exports by the coordinated action of its members. “The IEA release was a bit of a shock to the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Worries about the economy and the Greek debt crisis had been sending prices lower before the release and are coming back to the fore.” Crude oil for August delivery declined 84 cents, or 0.9 percent, to $90.18 a barrel at 12:19 p.m. on the New York Mercantile Exchange. The August contract is down 3 percent this week. Brent crude oil for August delivery dropped $2.73, or 2.6 percent, to $104.53 a barrel on the London-based ICE Futures Europe exchange.
• Sarkozy Campaign Against Food Price Speculators Moves to Finance Ministers. French President Nicolas Sarkozy’s fight to curb speculation in agricultural commodities, blamed for the “plague” of record food prices, moves to the Group of 20 finance ministers, who may balk at the toughest proposals. France, which holds the G-20 presidency this year, won the backing of agricultural ministers meeting in Paris this week to put commodity market regulation on the agenda of the finance ministers, who meet in September in Washington. The ministers probably won’t agree on “tough” measures, said Shenggen Fan from the International Food Policy Research Institute.
• Former Premier Zhu Rongji Stirs China Property Policy Debate on Price Gain. Former Chinese Premier Zhu Rongji’s recent criticism of the country’s property policy underscores the debate over the extent to which rising real estate prices are benefiting the country as a whole. Zhu, who served as premier from 1998 to 2003, said in a speech at Beijing’s Tsinghua University that a decision to allow local governments to pocket money from land sales contributed to rising property prices and has been like “plundering” from the people. The remarks are spurring discussion in China because they reflect people’s dissatisfaction, said Joseph Cheng, a political-science professor at the City University of Hong Kong. The comments by Zhu reflect a 1994 policy that boosted local government revenue as property prices soared. Discontent over China’s widening income gap and corruption has deepened, contributing to riots and demonstrations in some regions. “We formulated a wrong policy by letting local governments pocket all of the land sale revenue without taking some for the national budget,” Zhu said in April at a 100th anniversary celebration for Tsinghua University, according to a report by the website of Phoenix TV. “The money is like plundering from people and has lifted up land prices so much.”
• Orders for U.S. Durable Goods Increased Greater-Than-Forecast 1.9% in May. Orders for durable goods climbed more than forecast in May, signaling manufacturing may be one of the first areas of the U.S. economy to rebound from a first-half slowdown in growth. Bookings for equipment meant to last at least three years rose 1.9 percent after a 2.7 percent April drop that was smaller than previously reported, data from Commerce Department showed today in Washington.
  

Wall Street Journal:

• China Delays Unveiling Airbus Deal. China's anger with the European Union's emissions-trading scheme for airlines has delayed the revealing of a major Airbus deal and could undermine upcoming deals, according to people familiar with the situation.
• CFTC Scrutinizes Suspicious Oil Trade Ahead of IEA Move.
• Obama, Top Senators to Meet on Budget.
• Cars 2 - Oil Industry Responds to 'Bad Guy' Label.
  

CNBC.com:

• Scenarios: Possible Impact of a Greek Ratings Default. As euro zone officials try to find a solution to the Greek debt crisis, it remains unclear what impact a Greek ratings downgrade to default could have on financial markets. Rating agencies are playing hard ball. They would consider a Greek debt restructuring, a reprofiling and even a voluntary rollover of existing debt holdings when they mature -- currently the most widely-touted solution to the crisis -- as a default.
• IEA Ready to Release More Oil, Show Its Bite: Tanaka. The International Energy Agency is ready to release more oil onto the market if necessary, Nobuo Tanaka, Executive Director of the agency, told CNBC in a first on CNBC interview Friday morning. “We are ready to act at any time and if we have to we will continue,” Tanaka said. He added that the watchdog “sometimes had to bite”.

Business Insider:

• The War in Libya Will Continue. In a small victory for President Barack Obama, a vote to cut funding for the U.S. military intervention in Libya failed in the House of Representatives this afternoon 238-180. Over 50 Republicans crossed the aisle to oppose the bill, which had the support of Speaker of the House John Boehner, and would have limited U.S. resources to non-combat operations like search and rescue.
  
• Here's What Happened At That Big Dinner With Obama And The Hedge Funders.
• Support for Greek Austerity Crumbling, As ANOTHER Ruling Party Politician Says He May Vote Against A Deal.
  

Zero Hedge:

• Why The Eurozone And The Euro Are Both Doomed.

Seeking Alpha:

• Credit Default Swaps for Doomers, Politicians and the Media.

TheStreet.com:

• Hedge Funds Adapt to New Clients.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Thirty-nine percent (39%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -16 (see trends).

Reuters:

• Exclusive - Banks Discuss New Greek Rollover Plan - Source. European banks and insurers moved closer on Friday to a voluntary rollover of their Greek government debt holdings, hoping to get around rating agencies' reservations and avoid a Greek government default.
• Investors Wary of PC Sales After Micron Results. Micron executives' comments late on Thursday about limited visibility of consumer PC demand and higher-than-ideal inventories of DRAM chips sparked a Friday sell-off in stocks linked to personal computers.
• European Shares Hit Longest Losing Run Since 1998.
  

Financial Times Deutschland:

• Economic growth in the euro region excluding Germany and France shrank in recent weeks amid rising oil prices, persistent debt and effects from the Japanese earth quake, citing surveys of euro-area purchasing managers.

Shanghai Daily:

• Developer Told to Drop Luxury Villa Prices. THE developer of Top Forest Villa, a luxury real estate project in the Sheshan area in Shanghai that has captured newspaper headlines over the past few days due to its expensiveness, has been told to lower prices and register with the local industry watchdog.

China Finance 40 Forum:

• China may raise interest rates at the end of June or early July, Zhang Ming, a researcher with the Chinese Academy of Social Sciences, wrote in a commentary. Zhang also warned that China's foreign exchange reserves may suffer from significant losses from dollar depreciation and global inflation.