Today's Headlines

Bloomberg:

• Berlusconi Vows to Speed Up Austerity Plan Approval as Market Rout Eases. Italian Prime Minister Silvio Berlusconi vowed to hasten passage of a 40 billion-euro ($56 billion) deficit-cutting plan to stop a market selloff that threatens Europe’s single currency. The “crisis prompts us to speed up” approval of the budget cuts, the premier said today in an e-mailed statement, his first public comments on a rout that saw Italian stocks lose almost 7.5 percent over two sessions and bond yields soar to the highest in a decade. Speaking of the austerity plan, Berlusconi pledged “to bolster its content and draw up additional measures aimed at balancing the budget by 2014.”
• Italian Bonds Snap Six-Day Drop on Speculation ECB Bought Country's Debt. Italian and Spanish bonds rose on speculation the European Central Bank bought the debt of the euro region’s most-indebted nations to stabilize markets amid concern that the debt crisis is worsening. Greek 10-year yields fell the most in almost two weeks while equivalent-maturity Spanish yields retreated from a euro- era record reached earlier. Italian bonds rose, with yields below 6 percent after breaching the level for the first time since 1997.
• No 'Immaculate Solution' to European Sovereign Debt Crisis, El-Erian Says. European policy makers need to quickly address the worsening sovereign-debt crisis in Greece, Italy and Spain before it becomes a greater threat to the euro- zone’s integrity, according to Pacific Investment Management Co.’s Mohamed A. El-Erian.
• Greece Won't Manage to Sell All Assets Required in Aid Plan, Economou Says. Greece’s deputy finance minister, Pantelis Economou, said the country won’t manage to sell everything on its list of planned state-asset sales and real- estate developments. “We will sell a lot less than planned,” he told lawmakers yesterday, according to a transcript posted on the Parliament’s website. Economou said there isn’t enough investor interest in the assets for sale as “credit default swaps and spreads are the kinds of thing they have their eyes on.” Concrete assets are “riskier,” he said.
• Stress-Test Data May Spur Instability, EU Document Says. The risks to financial stability from analysts using European Union stress-test data to conduct their own exams on banks “should not be underestimated,” according to a confidential document prepared by EU officials. There is an expectation the European Banking Authority stress-test results will be “challenged by market tests” aiming to address “the perceived weaknesses in the design,” according to the draft document obtained by Bloomberg News. That may result in nations with lower-rated sovereign debt struggling to borrow money to fund their banks, according to the document. “The conditions in EU financial markets and the economy have deteriorated since the stress scenarios were envisaged,” Sony Kapoor, managing director of policy group Re-Define Europe, said in a telephone interview today. “While the tests are still robust under current conditions, the safety buffer for further deterioration has shrunk.” This year’s exams, which will be published on July 15, will include a review of how lenders would handle a 0.5 percent economic contraction in the euro area in 2011, a 15 percent drop in European equity markets as well as possible trading losses on sovereign debt. The banks will be expected to maintain a Core Tier 1 capital ratio of at least 5 percent under the stress-test scenarios, the EBA has said.
• European Unity Project Mustn't Be Abandoned, Soros Writes in FT. The European status quo has become untenable, yet it should still be possible to mobilize a “silent majority” in favour of further advance toward a united Europe, said George Soros, the billionaire investor. Writing in the Financial Times, Soros said the euro was from the start an incomplete currency, in the sense that it had a central bank but no treasury, and its architects thought, wrongly, that markets would correct their own excesses; hence they set up rules designed to stop only public-sector excesses. The excesses, however, were mainly in the private sector, as interest-rate convergence generated economic divergence; lower rates in the weaker countries led to housing bubbles, while the strongest country, Germany, had to keep a tight rein to cope with reunification; and finance was compromised by the spread of risky financial instruments and unsound lending practices, Soros said. As integration has turned into disintegration, Europe’s political establishment has turned from spearheading further unification to defending the status quo, he said. A Greek default may be inevitable, but it needn’t be disorderly; the rest of the eurozone must be safeguarded, and that means strengthening it through a wider use of Eurobonds and a eurozone deposit-insurance arrangement, Soros concluded.
• Rice May Extend Gains as Supplies Tighten on Thailand Traders' Hoarding. Rice prices in Thailand, the world’s biggest exporter, may extend gains as supplies tighten at the end of the harvest season and millers hoard the grain on expectations of an increase in government’s purchase price. Export prices of rice may climb 49 percent to $800 per metric ton in the fourth quarter as the newly elected government led by Pheu Thai Party implements a pledge to buy the grain from farmers above market rates, according to a survey of four exporters, millers and traders. Rising prices in Thailand may support a 60 percent jump in rice futures in Chicago and increase global food costs tracked by the United Nations that advanced in June for the 10th time in the past 12 months. Rice rose globally in June, “reflecting strong import demand and uncertainty over export prices in Thailand,” the Food and Agriculture Organization said last week. “Costlier rice from Thailand, which accounts for about 30 percent of worldwide shipments, will drive prices higher around the globe,” said Sumeth Laomoraphorn, chief executive officer of C.P. Trading Co., Thailand’s fourth-largest exporter.
• Corn Advances as U.S. Forecasts Inventory Decline; Soybeans Extend Rally. Corn rose to the highest price this month after the government said U.S. stockpiles will be smaller than expected, heightening concern that costs for food and fuel will climb. Soybean prices also gained. Corn futures for December delivery rose 14.75 cents, or 2.3 percent, to $6.475 a bushel at 11:19 a.m. on the Chicago Board of Trade, after touching $6.4875, the highest since June 30. Before today, the price was up 60 percent in the past year. Soybean futures for November delivery gained 2 cents, or 0.1 percent, to $13.49 a bushel on the CBOT, heading for a seventh straight gain, the longest rally since December. Before today, prices were up 41 percent in the past year.
• Crude Oil Advances for First Day in Three as Europe Works on Debt Crisis. Oil rose for the first time in three days in New York as European governments worked to halt the region’s credit crisis. Crude for August delivery rose 59 cents, or 0.6 percent, to $95.74 a barrel at 11:23 a.m. on the New York Mercantile Exchange. Earlier, prices fell to $93.55, the lowest level since July 1. Futures have risen 28 percent in the past year.
• Thomas Cook Shares Plunge as Tour Operator Cuts Full-Year Forecast. Thomas Cook Group Plc (TCG), Europe’s second-largest tour operator, plunged in London trading after cutting its full-year profit forecast because of unrest in North Africa and a squeeze on consumer spending in the U.K. The shares fell as much as 36.7 pence, or 30 percent, to 86 pence, reducing the company’s market value by about 321 million pounds ($507 million) to 752 million pounds.
• News Corp.(NWSA) Boosts Stock Buyback to $5 Billion. News Corp. (NWSA), whose stock has dropped for four days amid a probe into alleged phone hacking by the company’s U.K. journalists, almost tripled its stock-buyback program to $5 billion.
• Obama's Proposals 'Smoke, Mirrors': McConnell. Senate Republican Leader Mitch McConnell said President Barack Obama is putting an expansion of government ahead of the goal of a bipartisan plan to cut the U.S. deficit, and said Democrats have prevented a large-scale “grand bargain.” ‘I was one of those who had long hoped we could do something big for the country,’’ McConnell said in remarks on the Senate floor today. “But in my view the president has presented us with three choices: smoke and mirrors, tax hikes, or default. Republicans choose none of the above.” Instead, he said, “Republicans will choose a path that actually reflects the will of the people -- which is to do the responsible thing and ensure the government doesn’t default on its obligations.”

Wall Street Journal:

• China Premier Signals Pressure on Prices. Chinese Premier Wen Jiabao sounded a hawkish note on inflation ahead of key data expected to show slowing economic growth, emphasizing that the government will continue to make cooling prices its key priority.
• Buffet-Backed BYD Sees Big First-Half Drop. Warren Buffett-backed China car and battery maker BYD Co. Tuesday said first-half profit is expected to fall up to 95% from a year ago because of intensifying competition and the cancellation of government subsidies for car buyers.
• Riskier Loans Make a Comeback, as Private Firms Take the Field. After years as the lending market's undesirables, aspiring home buyers with less-than-stellar credit are being offered home loans again—with some of the same conditions and catches critics say tripped up subprime borrowers five years ago. According to analysts, a handful of private investment firms have started making home loans to borrowers who fail to meet banks' requirements, which got tighter post-crash and have largely stayed that way. And for now they are holding them on their books, which is novel. At least two, Athas Capital Group, of California, and New Penn Financial, which is owned by Shellpoint Partners, of New York, are also making jumbo loans, or loans in most parts of the country that exceed $417,000, as the federal government appears to be scaling its support of that market.

CNBC.com:

• Trade Deficit Soars to Highest Level in Nearly Three Years. The U.S. trade deficit surged in May to the highest level in more than two and a half years, driven upward by a big increase in oil imports.
• Confidence From Business Owners Slipping. Confidence among US business owners slipped last month amid expectations of weak sales and a deterioration in business conditions over the next six months, a survey showed on Tuesday. The National Federation of Independent Business' optimism index dipped 0.1 point to 90.8 last month from May. Continued pessimism among small business owners could add to fears that the economy might take longer to dig out of the soft patch it has been trapped in since the beginning of the year.
• Moody's Report Sparks Selloff in Chinese Firms. Moody's warnings on accounting and governance risks at dozens of small Chinese companies sparked a selloff in their shares and bonds on Tuesday, as investors already unnerved by accounting scandals at overseas-listed Chinese firms stampeded for the exits. Shares and bonds issued by the firms on the ratings agency's list bore the brunt of selling on Tuesday. Some of the stocks tumbled more than 20 percent at one point, contributing to a 3.7 percent drop in the Hang Seng Chinese Enterprises Index, which tracks major Hong Kong-listed Chinese shares.

Business Insider:

• The Italian Debt Chart That Everyone Needs Seared Onto Their Brain.
• The "Smartest Man in Europe" is Very Gloomy.
• The 6 Reasons Italy Has Come Under Attack.
  

Zero Hedge:

• Willem Buiter Says If ECB Does Not Intervene in Thursday's Italian Bond Auction, It Will Likely Fail. Willem Buiter, Citigroup's chief economist and former BOE policy maker, told reporters in London today that "the ECB will intervene on whatever scale is necessary to allow Italy to conduct its auction on Thursday. If the ECB doesn’t come in, the Italian bond auction is likely to fail. What we’re going to have is the ECB is going to be doing the heavy lifting."
• Fed Minutes Released: "Some FOMC Members Think QE3 Would Be Appropriate.
  

AutomatedTrader:

• Sovereign CDS Index Activity Jumps as European Crisis Widens. Trading activity on a derivatives index that tracks the cost of protecting debt issued by 15 European sovereigns jumped Monday to its second-highest level ever after investors shunned Italian government bonds, stoking fears of contagion spreading from the still-unresolved Greek debt crisis. The iTraxx SovX Western Europe index's 303 trade count was more than four times its daily average since its inception last December, reflecting adjustments by traders of sovereign positions in response to changing market conditions, according to Markit, which administers the index. "It really does look like the magazine is empty of bullets--all spent in the rehearsal," wrote Suki Mann, a credit strategist at Societe Generale in London, in a market commentary Tuesday. "While politicians pontificate, Europe burns." The current version of the SovX Western Europe, series 5, started trading this past March 21; since then, its daily count has averaged 74 trades. The record high trade count on the SovX Western Europe was 385 last Thursday, a day when the cost of protecting Portuguese sovereign debt using CDS rose above 1,000 basis points for the first time, and CDS spreads on Greece and Ireland rose to new records, Markit said.

Seeking Alpha:

• Top 30 Growth Stocks Hedge Funds Are Crazy About.

Politico:

• Issa Probes White House Donor Meetings. House Ovesight and Government Reform Committee Chairman Darrell Issa is investigating the president's fundraising activities. "In what could be considered the committee’s sharpest probe to date of the White House, Issa sent a letter to Obama’s top lawyer Monday evening asking for a slew of documents relating to what the California Republican termed as 'an array of potentially illegal fundraising behavior,'" Fast Break writes for the hometown paper. "Issa singled out a White House meeting in March between Obama, Democratic National Committee officials and members of the business community — who were all Obama donors. The meeting was organized by the DNC. He’s also calling into question the Obama administration’s decision to provide access to administration officials – possibly including the White House chef – to large donors. ... 'We have an obligation to inquire into the activities of the now closed White House political office because these activities – some of them are continuing but they’re continuing less formally,' Issa said in a brief interview with POLITICO Monday evening.
• Pakistan Threatens U.S. Over Border Troops. Pakistan could pull troops from its border with Afghanistan and deal a setback to America’s war against the Taliban if the United States slashes aid to the country, the Pakistani defense minister threatened Tuesday. “If at all things become difficult, we will just get all our forces back,” Defense Minister Ahmed Mukhtar said in an interview airing in Pakistan, Reuters reported. “If Americans refuse to give us money, then okay,” he said. “I think the next step is that the government or the armed forces will be moving from the border areas. We cannot afford to keep military out in the mountains for such a long period.”

Rasmussen Reports:

• Support for Miliary Action in Libya Is Down to 24%.

Reuters:

• China Says Piracy Problem Not "Extremely Serious". China said on Tuesday its crackdown on pirated goods has made great strides, a claim borne out by government statistics but not necessarily by a trip to one of Beijing's many shops where pirated software, movies and clothes are readily available. The United States and other Western countries have repeatedly complained that China has not kept promises to stamp out intellectual property theft. The U.S. Trade Representative's office in May listed China as a country with one of the worst records for preventing copyright theft for the seventh year. Chinese piracy and counterfeiting of U.S. software and a wide range of other intellectual property cost American businesses alone an estimated $48 billion and 2.1 million jobs in 2009, the U.S. International Trade Commission said in May.
• US Muni Board Could Increase Derivatives Oversight. The board that writes the rules for the U.S. municipal bond market could soon ratchet up oversight of the sale of derivatives at the heart of a massive fraud scandal, the board's executive director said on Tuesday. Some of the world's largest banks have been ensnared in a federal probe into allegations their employees chose in advance which investment house would win the auctions of guaranteed investment contracts.
• India's May Industrial Output Up 5.6% Y/Y. India's industrial output in May rose a slower-than-expected 5.6 percent from a year earlier, government data showed on Tuesday. The median forecast in a Reuters poll was for an annual rise of 8.2 percent. April's industrial output growth was revised downwards to 5.8 percent from 6.3 percent. Manufacturing output , which constitutes about 80 percent of the industrial production, rose an annual 5.6 percent, the federal statistics office said in a statement. During April-May, industrial output grew 5.7 percent from 10.8 percent a year ago. Industrial output grew 7.8 percent in the 2010/11 fiscal year that ended in March, slower than 10.5 percent clocked in the previous fiscal year.
• U.S. Watchdog to Be Year-Round Cop for Big Banks. The new U.S. consumer financial watchdog is gearing up to deploy hundreds of examiners to large banks, saying on Tuesday it will do year-round policing at the biggest and riskiest banks. Republicans and the bank industry have disparaged the agency as an unnecessary layer of regulation that, if overzealous, could restrict consumer choice and lending.

Handelsblatt:

• World Trade Organization Director General Pascal Lamy said European governments should withdraw support measures given to the financial industry and carmakers, citing an interview.

The Economic Observer:

• Moody's Investor Service Vice President Yvonne Zhang urged the Chinese government and banking industry to disclose financial information, according to an interview.

Xinhua:

• China, North Korea Pledge to Enhance Friendly Ties. Top leader Kim Jong Il of the Democratic People's Republic of Korea (DPRK) and visiting Chinese Vice Premier Zhang Dejiang pledged here Tuesday to further strengthen the friendly relations between the two neighboring nations. During a meeting with Kim, Zhang stressed that on the occasion of the 50th anniversary of the Treaty of Friendship, Cooperation and Mutual Assistance Between China and the DPRK, his visit was aimed at conveying the friendly sentiment of the Chinese people to their DPRK counterparts and pushing forward the bilateral friendly and cooperative relationship. Citing Kim's three trips to China since early last year, Zhang said that the visits and Kim's meetings with Chinese President Hu Jintao infused strong power into the development of the bilateral relations. Beijing is ready to work with Pyongyang to constantly deepen their communications and cooperation in various fields and further boost the DPRK-China friendship, said the Chinese vice premier, who arrived here Sunday with a delegation.