Today's Headlines

Bloomberg:

• Rajoy Battles ECB for Loans; Monti Appeals for EU Action. Spain and Italy appealed to European policy makers to step up their response to the financial crisis after a 100 billion-euro ($125 billion) lifeline for Spanish banks failed to calm markets. Spanish Prime Minister Mariano Rajoy said today he’ll “battle” central bankers refusing to buy debt from peripheral nations. Rajoy published a letter to European Union leaders calling for the European Central Bank to buy debt from the countries struggling to shore up their finances. “That is the battle we have to wage in Europe,” Rajoy told the Spanish parliament in Madrid today. “I am waging it.” His Italian counterpart, Mario Monti, told lawmakers in Rome Europe faces a “crucial” moment.
• European Stocks Fall As Borrowing Costs Rise At Debt Sale. European stocks declined as borrowing costs increased at debt auctions in Germany and Italy and as Sweden’s SKF (SKFB) AB reported weakening demand for its products in the second quarter. SKF, the world’s largest maker of ball bearings, dropped 7.3 percent. Renault SA (RNO) led a selloff by carmakers, sliding 4.2 percent. Etablissements Maurel & Prom SA surged the most since 2003 amid takeover speculation. The Stoxx Europe 600 Index (SXXP) dropped 0.4 percent to 242.56 in London.
• Greek Vote Won’t Alter Country’s Crisis, Schaeuble Tells Stern. Greece’s election results won’t change the reality of the country’s economic crisis and won’t prevent the nation from carrying out painful reforms, German Finance Minister Wolfgang Schaeuble told Stern magazine. Greeks on June 17 “can vote however they want,” Schaeuble told the German magazine in an interview today. “But whatever election result we have will change nothing about the actual situation in the country, which is in a painful crisis brought on by a decades-long flawed economy.” The German finance chief was quoted by Stern as saying he had “really great sympathy with the man on the street in Greece” suffering under the effects of austerity. “I can’t spare him that,” he added. “Crises are seldom fair.” “It’s not easy to cut the minimum wage in Greece if you think about all the yacht owners,” Schaeuble said. “But the Greek minimum wage is just dropping to the level of Spain. If the country wants to become competitive again, it has to sink.”
• Tsipras Sees Greece in Euro Even After Repealing Austerity. Alexis Tsipras said he expects the European Union will do all it can to keep Greece in the euro even if he wins elections and carries out his promise to repeal the austerity measures required to receive emergency loans. "We have no sense that European partners will follow this tactic of blackmail heard from some quarters and stop funding," Tsipras, whose Syriza party is vying for first place in pre- election polls, said in an interview in Athens today with Bloomberg Television. "Something like that would be catastrophic not only for Greece but for the entire euro area." Tsipras's promise to abrogate the terms of the bailout amounts to a bet the EU and International Monetary Fund will stop short of kicking Greece out of the 17-nation euro. "We want to simply convince our partners that it's in the interests of all to stop sending EU taxpayers' money into a bottomless pit," Tsipras said. "This money should be used properly in a program that is effective and not on a memorandum that has failed." Syriza was propelled to second place in the inconclusive May 6 vote. Most opinion polls show Syriza and New Democracy, which backs the bailout, running even for first place. According to the last opinion polls on June 1, neither has enough support at this point to rule alone.
• Deutsche Bank(DB) May Have $18 Billion Italy, Spain Gap. Deutsche Bank AG has a funding gap of as much as 14 billion euros ($17.5 billion) at its Italian and Spanish units which could reduce capital levels at the firm if those countries leave the euro, according to analysts at Espirito Santo Investment Bank. Deutsche Bank’s loans amount to 205 percent of deposits at the Italian unit and 314 percent in Spain, according to London- based analyst Andrew Lim, who cited company filings. If those countries exit the euro and the new currencies fall 30 percent, the Frankfurt-based lender could lose as much as 4.2 billion euros of equity as the value of assets at those divisions declines while some funding remains in euros, he said.
• Euro-Area Industrial Output Falls Second Month on Germany. Euro-area industrial production declined for a second month in April, led by a drop in Germany, adding to signs of a deepening economic slump. Output in the 17-nation euro area slipped 0.8 percent from March, when it decreased a revised 0.1 percent, the European Union’s statistics office in Luxembourg said today. Economists had projected a drop of 1.2 percent, the median of 28 estimates in a Bloomberg News survey showed. From a year earlier, production fell 2.3 percent.
• Dimon Says US Fiscal Cliff May Be Reached Before Year-End. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon, testifying to a U.S. Senate panel, said the government is risking an earlier-than-expected fiscal crisis as policy makers stay deadlocked on taxes and the budget. “The one thing to keep in mind about the fiscal cliff is it may not wait until Dec. 31,” Dimon, 56, said today before the Senate Banking Committee, which called him to answer questions about a $2 billion trading loss. “Markets and businesses may start taking actions before that, that create a slowdown in the economy.”
• Dimon Fires Back at 'Complex' System in U.S. Senate Grilling. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon spent much of his time at a hearing where U.S. senators aimed to put him on the defensive firing back at the federal regulatory system. During more than two hours before before the Senate Banking Committee, Dimon described a $2 billion loss in the bank’s chief investment office as a hedge that “morphed into something I can’t justify,” and largely blamed subordinates for a trading strategy gone wrong. The bank is looking at clawing back some of the compensation earned by those responsible, he said.
• Retail Sales in U.S. Declined for a Second Month in May. Retail sales in the U.S. fell in May for a second month, prompting economists to cut forecasts for economic growth as limited job and income gains hold back consumers. The 0.2 percent decrease matched April’s drop that was previously reported as a gain, Commerce Department figures showed today in Washington. Sales excluding car dealerships slumped by the most in two years. The smallest wage gains in a year and unemployment exceeding 8 percent are taking a toll on the consumer spending that accounts for about 70 percent of the economy, leaving it more vulnerable to shocks from the European crisis. “The consumer is pulling back,” said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who correctly forecast the drop in sales. “There isn’t a lot of job creation. We will continue to see softer numbers.”

Wall Street Journal:

• Italy's Inconvenient Truth. Somebody hasn’t been reading their Machiavelli. The Austrian finance minister, Maria Fekter, had the audacity to actually speak plainly and openly this morning, about the state of Italy. This has angered the Italian leadership. Because these are not times for politicians to speak openly.
• Risks Rise as Europe's Banking Ties Fray. The biggest threat to the survival of the euro may not be a Greek exit. It may be the Balkanization of Europe's banking system. Financial markets are braced for the growing likelihood that Greece will abandon the euro sooner or later. That raises the prospect that another euro member will leave, but it's ever easier to cast Greece—with its crippling government debt and political chaos—as sui generis. A bigger deal is the unraveling of the decadelong cross-border integration of European banks.
• Crédit Agricole Girds Greek Unit for Greece Euro Exit. Crédit Agricole SA is making contingency plans to abandon its Greek bank or merge it with a conglomerate of domestic banks in the event of Greece leaving the euro zone, according to a person with direct knowledge of the plans.
• Steep Rise in Health Costs Projected. Economists have been puzzling over whether a three-year slowdown in the growth of health-care spending, prompted by the economy, portends a permanent change. Federal projections indicate that isn't the case. A forecast released Tuesday said the growth rate for U.S. health spending of all types would stay historically low the next two years. But it would increase if most of the federal health-care overhaul takes effect in 2014.
• Goldman(GS) Looks to Forecast the Forecasts. Bank strategists often use analyst forecasts to peer into the future of the stock market, as changes can signal surprises in store. Now, Goldman Sachs Group Inc. is taking it a step further with a new indicator. Call it predicting the predictions.

MarketWatch:

• Crisis focus shifts to Italy ahead of key auction. Italy braces for medium- and long-term-debt auctions.

CNBC.com:

• US Business Inventories Grow in April, Hit Record High.
• Germany Warns Italy Over Euro Zone Crisis. Germany told Italians on Wednesday they must keep taking Prime Minister Mario Monti's tough economic medicine to avoid becoming the next victim of the euro zone debt crisis after a bailout for Spain's banks failed to calm markets.
• Central Bank Money-Printing: $6 Trillion... and Counting. Many more years of money printing from the world's big four central banks now looks destined to add to the $6 trillion already created since 2008 and may transform the relationship between the once fiercely-independent banks and governments.
• US shale boom to create half-million jobs.

Business Insider:

• Barack Obama's Lead In National Polls Has Collapsed.
• Chart of the Day: Spain's Gigantic Debt Problem.
  

Zero Hedge:

• The Cost Of The Best Senate Banking Committee JP Morgan Can Buy: $877,798 In Bribes.
• Italian Bonds Back In The Crosshairs.
• European Banks Preparing To Boycott Big Three Rating Agencies.
• SocGen's Albert Edwards on Spain: "A Bailout Will Solve Nothing".
  

YouTube:

• The Genius of Mutual Indebtedness - Nigel Farage. (video)

@EdConwaySky:

• House prices in Beijing are over 3x more expensive (in relation to income) than in London or New York. (graph)
  

NY Post:

• Romney Leading Obama in Wisconsin, New Poll Finds. Mitt Romney is leading President Barack Obama in Wisconsin, according to a new poll released Wednesday. The new Rasmussen Reports survey showed the Republican nominee leading Obama 47 percent to 44 percent in the Badger State, within the poll's margin of error. The telephone survey of 500 Likely Voters also showed four percent undecided. The poll also found 47 percent of voters approved of Obama's job performance while 52 percent disapproved. Romney, on the other hand, was viewed favorably by 49 percent of respondents and unfavorably by 45 percent.

Bespoke:

• Bank and Broker Default Risk. (graphs)

Reuters:

• Algeria Says OPEC Faces Risk From Oil Price Slide. The Organization of the Petroleum Exporting Countries (OPEC) will face a real risk because of a slide in crude oil prices caused by the group exceeding its production ceiling, Algerian Energy and Mines Minister Youcef Yousfi was quoted as saying on Wednesday. "I hope there will be an awareness of the negative effect (of increased oil production) on prices, particularly in recent weeks, and thus OPEC faces a real risk," Algeria's official APS news agency quoted him as saying in Vienna ahead of an OPEC meeting.
• Exclusive - LME copper players turn up heat on warehouse queues. Global copper market heavyweights are drafting proposals to stop metal from getting stuck in queues leaving storage facilities, as such delays would threaten the credibility of the London Metal Exchange's (LME) flagship product, industry sources said.
• Copper slips on U.S. data, euro debt fears. Copper dipped on Wednesday, reversing earlier gains, after a U.S. retail sales report reinforced views the world's top economy is slowing and added to fears of worsening euro zone debt and upcoming elections in Greece.

Telegraph:

• Debt crisis: Greeks pulling €800m a day from banks. Greeks are withdrawing up to €800m a day from their banks and stocking up on basic food supplies ahead of the election on Sunday that many fear will result in the country being forced out of the euro.
• Debt crisis: Bailed-out Spain pleads for aid from European Central Bank. Spain's prime minister said he is “battling” to get the eurozone’s central bankers to bring down the country’s record borrowing costs, amid predictions the state will need a second bail-out to save itself.

Times:

• UK Chancellor of the Exchequer George Osborne said that if Germany is to save the euro, a Greek withdrawal from the common currency might be the price necessary to secure the German public's acquiescence.
  

Irish Times:

• The European Commission and the IMF can't totally rule out the need for more capital for Irish banks, citing documents supplied to German lawmakers. Risks include continued weakness in the housing market and an increase in non-performing loans.
  

FT Deutschland:

• Every new Greek govt., independent of the June 17 election outcome, will seek amendments to the bailout. The Eurozone won't deny this if it wants to keep Greece in. The Troika expects Greece won't have met the conditions of austerity program.

Tageblatt:

• Europe's banking system cannot be rescued by plowing money into a "common European pot," Luxembourg Finance Minister Luc Frieden said. "I grasp the idea of a banking union in principle, but you cannot mutualize all risks in Europe," Frieden said in a preview of an interview to be published in Tageblatt tomorrow. "Yes to more Europe, but only when it includes an effective and serious banking world that doesn't force some to pay for others' blunders," he said.
  

Bild:

• German Insolvencies Rose in March to the Highest in 2 Years. 2,809 companies went bankrupt during the month.
  

China Daily:

• China's GDP growth in the second quarter may be below 7% if economic data in June doesn't improve, citing Zheng Xinli, vice president of the state-backed China Center for International Economic Exchanges.