- Greece Races as Cash Dwindles With Europe Seeking Return to Cuts. Greece’s two traditional political rivals are in a race to forge an unprecedented coalition as the state’s cash dwindles, bank deposits flee and Europe demands renewed austerity pledges before releasing more emergency aid. Greece will run out of money in mid-July, the Syriza party, which placed second in yesterday’s election, said on June 13 after being briefed by Acting Finance Minister Giorgios Zanias. Caretaker Labor and Social Security Minister Antonis Roupakiotis refused to offer assurances pensions will be paid in August, Athens News Agency reported the same day. “There’s no time to lose or leeway for small party games,” Antonis Samaras, leader of New Democracy, said in Athens yesterday after placing first in a rerun vote that will force him to rule with the third-place socialist Pasok party. “The country must be governed.”
- Greece Still Has No Crisis Plan After Vote, Germany’s Bild Says. Greece’s parliamentary election doesn’t ease the euro area’s crisis because voters failed to give clear support to the shared currency, Bild, Germany’s most- read newspaper, said in an editorial. “Far too many Greeks voted for the leftist party that is taking them for a ride,” Bild said, referring to Syriza, which rejects the terms of Greece’s bailout. “In truth, Greece is a developing country. It has no economic basis, no administration worthy of the name and still no plan for changing that.” “Nobody can draw any clear conclusions from a slim majority, neither in Athens nor in the rest of Europe,” Bild said in an e-mailed editorial for tomorrow’s edition. Greece’s election “split and paralyzed the country and doesn’t help the euro out of the crisis.”
- Hollande Bolstered as Socialists Win French Parliament Control. French President Francois Hollande’s Socialist Party and its allies won an absolute majority in the National Assembly, exit polls showed, paving the way for them to pass legislation without the aid of other members of parliament. The Socialist bloc won 314 out of the 577 seats, pollster CSA said, with 289 needed for a majority. Former President Nicolas Sarkozy’s Union for a Popular Movement party and its allies have 228 seats, CSA said, and the anti-euro National Front won two seats. Turnout in the second and decisive round of legislative elections yesterday was 56 percent. The victory gives the Socialists control of practically every political institution in France -- the presidency, the upper and lower houses of parliament, all but two of the regions and most of the country’s big cities, communes and departments - - a first in the Fifth Republic. Control of the lower house of parliament will allow Hollande to push through the tough decisions needed amid Europe’s debt crisis. With growth stalling at home, Hollande now faces the task of telling the French people that the state’s depleted coffers may mean cuts in spending and higher taxes as he makes good on his deficit-cutting promises. “The result means that President Hollande and his government have free reins to continue to govern,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “With domestic politics now out of the way, investors’ focus will probably turn to the domestic economy, which has shown recently worrying signs of deterioration, and to the Franco- German relationship, which has yet to reach cruise speed.”
- Spanish Yields Suggest Bond Investors Slamming Door: Euro Credit. Investors who oversee more than $3.2 trillion expect Spain to become the fourth euro member to need external funding as borrowing costs surge to levels too punitive for the nation to finance its needs on the capital markets. Spanish debt slumped last week, pushing the 10-year yields to 7%, as investors at Fidelity Investments, Frankfurt Trust and Principal Investment Management said the nation may lose market access. "Yields are at levels at which Spain can't really afford to finance itself for more than a few months," said Craig Veysey, head of fixed income at Principal Investment Management in London, part of Sanlam Group, which manages $72 billion.
- Spain Needs Liquidity Injection From ECB, Minister Tells ABC. Spanish Deputy Minister for European Affairs Inigo Mendez de Vigo said countries including Spain need a liquidity injection from the European Central Bank, according to an interview in ABC. The government’s last overhaul of the banking industry, which increased provisions for losses, may not have been sufficient as some banks weren’t able to make those provisions, Mendez de Vigo told the newspaper.
- Europe Gets Emerging Market Crisis Ultimatum as G-20 Meet. European leaders are facing pressure at the Group of 20 summit in Mexico to halt market uncertainty and stamp out the debt crisis as global partners hint at help to keep the world economy afloat. As elections in Greece reduced the immediate risk of the euro area’s breakup, China and Indonesia signaled growing exasperation with more than two years of European crisis- fighting that has failed to stem the threat of global contagion. World Bank President Robert Zoellick said that policy makers bungled their attempt to rescue Spain’s banks. “I hope that one way or another our European colleagues will reach an agreement on rigorous methods to manage the crisis,” Indonesian President Susilo Bambang Yudhoyono, who heads Southeast Asia’s biggest economy, said in a speech in the Mexican resort of Los Cabos yesterday. “The absence of such methods will have unsettling consequences to all of us.” The two-day G-20 summit starting today kicks off a week of crisis meetings taking place after Spain this month became the fourth euro-region nation to seek a bailout amid the weakest global economy since the 2009 recession.
- Ireland May Need to Write Down Debt for Recovery, Reinhart Says. Ireland and other “advanced economies” may have to write down billions of euros in personal and corporate debt before economic growth can return, Carmen Reinhart said in an interview with the Sunday Business Post. “To restore solvency and the confidence that you can grow again, you need to deal with the debt overhang,” Reinhart, a senior fellow at the Peterson Institute for International Economics in Washington, told the Dublin-based newspaper.
- China Abandons Role of Global Engine as Wen Tempers Stimulus. Premier Wen Jiabao has an unspoken message to his Group of 20 counterparts in Mexico today: This time, don’t count on a growth bailout from China. In the depths of the 2008 credit crunch, Wen’s 4 trillion yuan ($586 billion) fiscal injection over two years and 17.6 trillion yuan credit surge helped prop up the global economy. In China, it fueled a property bubble, stoked inflation and amassed bad debts that Fitch Ratings says weakened the banking system. “The government is trying to strike a better balance between stabilizing growth in the short term and adjusting structure in the long term,” said Peng Wensheng, chief economist in Beijing at China International Capital Corp., who worked at the International Monetary Fund and Hong Kong’s central bank. Total stimulus this year may be less than one- third the size of the 5.4 trillion yuan fiscal and monetary firepower of 2009, Peng said. Investment is more strategically focused than the efforts that year that helped cushion everyone from Australian iron-ore exporters to General Motors Co., which saw its Chinese sales soar 67 percent as it coped with bankruptcy at home. Of some 818 billion yuan in projects recently approved, 55 percent were for clean energy or subsidies for fuel-efficient cars, according to Australia and New Zealand Banking Group Ltd.
- China Home Prices Fall in More Than Half Cities Tracked. China’s home prices fell in a record 54 of 70 cities tracked by the government in May as developers cut prices to boost sales amid housing curbs. The eastern city of Wenzhou led declines with a 14 percent slump in values from a year earlier, while Beijing and Shanghai recorded losses of as much as 1.6 percent, according to data released by the statistics bureau today. China has pledged to maintain its curbs on the housing market even as economic growth is slowing, prompting the central bank to cut borrowing costs for the first time since 2008 on June 7. The Housing Ministry said this month that China will steadfastly continue with its property curbs that have so far included higher down payments and restrictions on the number of homes being bought.
- Fed Seen Twisting to Risk Management to Spur U.S. Growth. Federal Reserve officials must choose this week between their best estimates and their worst fears of what will happen to the U.S. economy. Policy makers will bring new forecasts to their June 19-20 meeting and probably will mark down their April central-tendency estimate for growth of 2.4 percent to 2.9 percent this year. Lurking in the background is the risk of increasing financial stress in Europe and stubbornly high U.S. unemployment that has remained above 8 percent for 40 consecutive months. All this could prompt them to move away from their outlook for moderate growth and tilt toward a “risk-management” strategy pioneered by former Fed Chairman Alan Greenspan, which puts more emphasis on tracking and containing high-cost threats. Both Janet Yellen, the Fed’s vice chairman, and William C. Dudley, head of the Federal Reserve Bank of New York, used the phrase in the past month.
- Third Fed Stimulus Won’t Be Better Than QE2, Romney Says. Presidential candidate Mitt Romney said the Federal Reserve’s attempts at stimulating the U.S. economy “did not have the desired effect” and a new round of quantitative easing by the central bank wouldn’t fare better. The second round of quantitative easing, a series of bond purchases referred to as QE2, “was not extraordinarily harmful, but it does put in question the future value of the dollar and it will obviously encourage some inflation,” Romney said in an interview that aired today on CBS’s “Face the Nation” program. “A QE3 would do the same thing.”
- Indonesia's exports could slow further unless the crisis in Europe is resolved quickly, the country's Trade Minister Gita Wirjawan said.
Wall Street Journal:
- Saudis Bury Crown Prince in Mecca. Attention Turns to Succession Plans; Prince Salman Is Expected to Be Named New Crown Prince. The surviving sons of King Abdulaziz gathered in the holy city of Mecca to bury the second heir to the throne within eight months, moving the succession process closer to a new generation in a family determined to maintain stability as the Middle East is gripped by political change.
- Homeowner Aid Boosts Big Banks. A government program that helps struggling homeowners take advantage of low interest rates to cut monthly mortgage payments is providing an unexpected revenue boost to large banks such as Wells Fargo(WFC) and J.P. Morgan Chase(JPM).
- Bombings Target Churches in Nigeria. Three suicide bomb attacks on churches rocked a northern Nigerian state Sunday, killing at least 21 people and wounding about 100, officials said, prompting protests in a state that has previously been strained by religious tensions.
- A Greek Reprieve. The Germans might have preferred a victory by the left in Athens. The tragedy of Greece, and much of the rest of Europe, is that it overborrowed during the euro's first decade to finance a higher standard of living than it could afford. Now the debtors have to adjust. The best way to do so is with supply-side reforms in taxes, pensions and labor markets that will lure investment and make Europe's economies more competitive. They need austerity for government but growth for the private economy. Without that, the Greek reprieve will be merely another opportunity lost.
Fox News:Business Insider:
- Iran: About 20 arrested for nuclear scientist hits. Iran says about 20 suspects have been arrested for alleged links to assassinations of Iranian nuclear experts that Tehran claims is part of covert operations led by Israel. Sunday's remark by Intelligence Minister Heidar Moslehi is the first official number on the detentions. Last week, Iran announced it had made arrests linked to the slayings.
- The Head Of Greece's Neo-Nazi Party Is The Only One Really Happy About Tonight's Outcome.
- 4 Reasons Why China Is Headed For Meltdown.
- Check Out These Awesome Photos Of What Apple's Next iPhone Could Look Like.
- Europe Will Splinter No Matter What Happens In Greece; 'France Has At Most Three Months' Says German Official.
- SocGen's Take On The Greek Elections And What Happens Next.
- And Now... Let's Play Chicken.
- Pasok Throws A Monkey Wrench Into Coalition Discussions.
- Muslim Brotherhood Declares Victory in Egypt Election. Egypt's Muslim Brotherhood declared on Monday that its candidate Mohamed Morsy won the country's first free presidential race, beating Hosni Mubarak's last prime minister and ending six decades of rule by presidents plucked from the military. But shortly before the final result the generals who have run the country since the overthrow of Mubarak issued new rules that made clear real power remains with the army. "Mohamed Morsy is the first popularly elected civilian president of Egypt," the official website of Brotherhood's Freedom and Justice Party announced in a brief message.
- Are Speculators 'Attacking' Spain and Italy? It may be hard to tell, but a subtle shift is going on behind the scenes in Europe. Both German Chancellor Angela Merkel and French President Francois Hollande have denounced “speculators” who are “unjustly attacking” Italy and Spain.
Wall Street All-Stars:
- Some Southern California 'nonprofit' Pot Shots Make Big Money. Documents show a cash-infused retail world bearing little resemblance to the one pitched to voters for the 1996 Compassionate Use Act for 'seriously ill Californians.'
- Russia Sending Missile Systems to Shield Syria. Russia’s chief arms exporter said Friday that his company was shipping advanced defensive missile systems to Syria that could be used to shoot down airplanes or sink ships if the United States or other nations try to intervene to halt the country’s spiral of violence. “I would like to say these mechanisms are really a good means of defense, a reliable defense against attacks from the air or sea,” Anatoly P. Isaykin, the general director of the company, Rosoboronexport, said Friday in an interview. “This is not a threat, but whoever is planning an attack should think about this.”
- Morgan’s big secret. The coming muni-bond crisis. While the Senate Banking Committee last week spun its wheels trying to get JP Morgan chief Jamie Dimon to admit to something nefarious during testimony about his “London Whale” trading loss, executives at the big bank were concealing a far bigger scandal. OK, it’s no secret that nation’s public pension funds are in big trouble, holding large “unfunded” liabilities owed to public workers once they retire. But most politicians (New Jersey Gov. Chris Christie is an exception) will tell you the problem is fairly containable, that there are simple fixes — such as raising taxes on the rich or pruning benefits. Not so, warns a “strictly confidential” report JP Morgan issued last year. It describes in straightforward, frightening detail how underfunded pensions are huge ticking timebombs for many of the nation’s big cities and states. The scandal isn’t simply that most public officials are misleading the public about the enormity of the problem and what steps must be taken to address the matter. As the Morgan report notes, many of the real liabilities are located “off balance sheet,” hidden from the public’s eye, and lax accounting standards let cities and states minimize their enormity. It’s also that JP Morgan itself kept the report’s findings a secret except for a few big clients, mostly hedge funds and large institutional investors, who got the inside tip on which states and cities are most likely to default on their debt as their pension liabilities fester. Yes: Default is a very real possibility, because the solutions are far from easy.
- India likely to cut rates despite high inflation. India's central bank is expected to cut interest rates on Monday in a bid to breathe fresh life into a sputtering economy even as inflation remains uncomfortably high.
- Business is starting to get tired of Europe. It was an article of faith not often tested that businesses liked the European Union.
- Greece will have to leave EMU whoever is elected. The exact circumstances and timing of Greece’s ejection from monetary union no longer have any systemic importance for global finance. The damage has already been done. The precedent of EMU break-up is by now priced into the credit markets. Formalising it changes little.
- Greek election: Live. German Chancellor Angela Merkel holds a conference call with Antonis Samaras following his Greek election victory and says that she is confident the country would now abide by its bailout pledges.
- Spanish Prime Minister Mariano Rajoy has ruled out for now increased value-added tax and cutting wages of public workers as suggested by the IMF, citing comments he made to reporters following a People's Party meeting in the northern city of San Sebastian.
China Securities Jounral:Weekend Recommendations
- China should introduce new measures to curb real-estate speculation "appropriately and prudently," according to a commentary on the front page of the China Securities Journal today. Some cities are loosening government restrictions on home purchases, according to the commentary, written by a reporter at the newspaper named Zhang Min. Real-estate speculation will hurt "reasonable" home demand and push up housing prices again, according to the commentary.
- Made positive comments on (SMG), (XOM), (COP), (CVX) and (NBR).
- Made negative comments on (NAV).
- Asian indices are +.75% to +1.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 180.5 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 147.50 -3.0 basis points.
- FTSE-100 futures +.71%.
- S&P 500 futures +.37%.
- NASDAQ 100 futures +.45%.
Earnings of Note
10:00 am EST
- The NAHB Housing Market Index for June is estimated to fall to 28 versus 29 in May.
- (DORM) 2-for-1
- (BTH) 2-for-1
- (ABCO) 2-for-1
- The Greek election outcome, G-20 Leaders Summit, India rate decision, Jefferies Consumer Conference, Goldman Sachs Chemicals Conference, (MSFT) announcement, (DHR) Analyst Meeting and the (TGP) investor day could also impact trading today.