- Europe Muddle Thickens as Doubts Persist Leaders Can Stem Crisis. Today, Merkel faces mounting pressure to make even greater concessions, by putting Germany's financial muscle behind an integrated banking and borrowing system to keep the euro intact. The question is whether, after two years of muddling through, Europe's pre- eminent power can act quickly and decisively. "I think she will remain an incrementalist: we have not yet reached the point where it is obvious that we are hanging over the precipice," said Paul de Grauwe, a professor at the London School of Economics and two-time Belgian candidate for a European Central Bank post. "It looks again that what is going to come out is going to temporarily pacify markets until it is clear that it is not going to be sufficient."
- Saddling Spain With Bank Burden Repeats Irish Error: Euro Credit. Spain's surging borrowing costs suggest the nation is hurtling toward a full sovereign bailout as the same aid policies that doomed Ireland to pariah status on the capital markets are repeated in southern Europe. Germany is reluctant to sanction disbursements directly to the region's banks. Channeling payments via governments, however, increases their debt burdens, undermining their creditworthiness and stoking investor concern about ranking behind official creditors for repayment.
- Greek Coalition Talks Enter Second Day Amid Merkel Aid Warning. Greek election winner Antonis Samaras begins a second day of talks to form a coalition after holding “constructive” meetings with two party leaders, racing to forge a government that keeps bailout aid flowing. Samaras secured initial agreement yesterday from Socialist Pasok leader Evangelos Venizelos, the former finance minister who negotiated the second rescue, and said he’d hold further talks today with Fotis Kouvelis, the leader of the Democratic Left party. If those three team up, they will hold a majority of 179 seats in the 300-member Greek parliament. With German Chancellor Angela Merkel offering little flexibility on emergency loans needed to keep Greece in the euro and avert economic collapse, leaders in Athens are scrambling to forge a government that can negotiate changes to some of the austerity measures linked to the 240 billion euros ($303 billion) pledged by international lenders. “With Mr Venizelos we remain in agreement that we must have, at all cost, and within the deadline of my mandate, a government of national salvation,” Samaras said in Athens yesterday after receiving the three-day mandate to form a government. “We will, of course, have new meetings.”
- Gross Says Germany in Bond Bubble as Liabilities Increase. Bill Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co., said Germany is in a bond market bubble as the country is saddled with rising liabilities from Europe’s debt crisis. “I would be leery of German bunds simply because there are only a few scenarios in which they can do well,” Gross said today in an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. “Germany for me is a credit risk. It’s not an attractive market.” Germany is the largest contributor to Europe’s bailout packages for Greece and a collapse of that nation’s economy and its possible exit from the euro area may weigh heavily on Chancellor Angela Merkel’s administration. While German bonds have profited from Europe’s crisis, pushing yields on two-year notes below zero this month for the first time, Gross said the bonds have little room to rise further, except in a scenario such as Germany leaving the euro.
- Dimon Faces ‘Harsher and Crazier’ House Crowd in Second Round. Jamie Dimon won’t get off as easy at his second congressional hearing this month when he tries to explain how JPMorgan Chase & Co. (JPM) (JPM) lost at least $2 billion on trades that he has said “violated common sense.” The U.S. House Financial Services Committee will be a tougher audience for Dimon when he testifies today after members of the Senate Banking Committee spent much of their June 13 hearing complimenting the chief executive officer or asking his advice on financial law, banking analysts said.
- Rubber Glut Extends Bear Market Cutting Bridgestone Costs. Rubber shortages are about to turn into a flood as China, the biggest consumer, grows at the slowest pace in three years, driving prices paid by Bridgestone Corp. (5108) and other tiremakers to the lowest since 2009. The surplus will reach 402,000 metric tons in the second half, from a 134,000-ton shortage in the first six months, said Chris Pardey, a former commodities trader at Cargill Inc. and Noble Group Ltd. Futures, which entered a bear market last month, will drop a further 21 percent to 200 yen a kilogram ($2,529 a metric ton) in Tokyo by the end of the year, the lowest since October 2009, according to the median of 15 analyst and trader estimates compiled by Bloomberg. This quarter’s 22 percent decline is the worst since the global financial crisis in 2008 and exceeds a 16 percent retreat in commodities. The slump is reducing income for growers from Thailand to Ivory Coast to Indonesia and costs for Bridgestone, the world’s largest tiremaker.
- EPA Won’t Curb Greenhouse Gases From Ships, Off-Road Trucks. The Environmental Protection Agency turned down a demand from U.S. environmental groups that it curb greenhouse-gas emissions from aircraft, ships or off-highway vehicles such as trucks used in mining operations. The agency sent a court-ordered response today to the Center for Biological Diversity and other groups, saying that it wouldn’t issue regulations for those sources of carbon dioxide anytime soon.
- Foreign Ownership of JGBs Highest Since '79. Foreign ownership of Japanese government debt rose to a record in 2011, signaling increasing dependence on investors abroad to finance the world’s largest public debt. Overseas investors owned 8.3 percent of JGBs as of the end of the fiscal year in March, the Bank of Japan (8301) said in a report released in Tokyo today. This was the highest since 1979, the first year for which comparable data is available.
- Fiscal-Cliff Concerns Hurting Economy as Companies Hold Back. Companies are starting to delay hiring and spending out of concern that Congress won't reach a compromise in time to avoid automatic tax increases and budget cuts that would pull billions of dollars of purchasing power out of the economy. Faced with a so-called fiscal cliff of more than $600 billion in higher taxes and reductions in defense and other government programs in 2013, U.S. companies are pulling back, though the deadline for congressional action is more than six months away. The best strategy for companies to follow when confronted with such uncertainty ahead of Dec. 31 is to "stay lean and keep your inventories taut," Sandy Cutler, chief executive officer of industrial equipment-maker Eaton Corp.(ETN) in Cleveland, told a conference. Economists are predicting this trend will pick up through the year.
- Spain Back in Cross Hairs. Greek Election Results Fade Quickly as Madrid's Borrowing Costs Set Record. The brief afterglow from Greece's vote Sunday to try to remain in the euro was quickly extinguished by a cascade of bad news out of Spain that again rattled faith in the currency bloc's ability to support its most troubled members. Fresh data from Spain's central bank showed the country's lenders were sitting on the highest level of bad loans in 18 years and that their deposits continued to leak away. The gloomy figures—and worries that consultants scouring the creaky banking system will find yet more problems—helped drive Spanish bond yields deep into territory that is widely viewed as unsustainable.
- Fed Wrestles With How Best to Bridge U.S. Credit Divide. The U.S. recovery is hobbled by an economic divide that separates Americans not by income or wealth but by their access to credit. The housing bust left behind millions of people with credit records damaged by plunging home prices, lost jobs, past overspending or bad luck. Many are now walled off from the low interest rates engineered by the Federal Reserve to spur the economy and remedy the aftereffects of the borrowing boom.
- Egypt Showdown Gains Momentum. Muslim Brotherhood, Claiming Victory in Presidential Election, Calls Protests and Moves to Reclaim Powers From Military. The Muslim Brotherhood appeared headed for a showdown with Egypt's ruling generals hours after claiming victory in Egypt's first freely contested presidential election, even as the military sought to assure the public it would hand over power. The Brotherhood, intent on reclaiming some of the powers that the military has claimed for itself in recent days, said it would convene Parliament on Tuesday in defiance of a court order dissolving the body, and called on Egyptians to take to the streets to challenge the military's recent moves to consolidate power.
- 'Whale' Swam in Choppy Waters. J.P. Morgan Chase & Co. trader Bruno Michel Iksil at times resisted sharing some details of his positions with superiors, while trading executive Achilles Macris had a history of clashing with co-workers, according to current and former colleagues. Mr. Iksil, a Frenchman known as "the London whale" for his outsize positions, and the Greek-born Mr. Macris are at the center of at least $2 billion of losses at the nation's biggest bank by assets. Each remains at the bank but is expected to leave, according to people at the bank.
- Banks Roll Out the Green Carpet to Attract High-Income Earners.
- Microsoft(MSFT) Unveils Surface Tablet to Rival iPad. Microsoft Corp. on Monday unveiled the first computer it has ever made, a tablet called the Surface that comes with a keyboard and other features designed to stand out in a market dominated by Apple Inc(AAPL).
- Russia Braces for Trouble in Its Export Markets. Government Doesn't Want State Firm to Buy BP's Stake in TNK-BP, Says Igor Shuvalov. Prices for oil, its main export, are sliding, and Russia is already gearing up for economic troubles, laying plans for spending cuts and a weaker ruble if the global situation worsens further, according to First Deputy Prime Minister Igor Shuvalov. "The dangers are clear—falling demand for our products and the prices on them—just what we saw in 2008. For the moment, it doesn't look that bad, but we need to be ready for the most dramatic possible shocks," he said in an interview.
- IMF: Emerging markets push new pledges to $456 bln. Several key emerging market countries Monday detailed their plans to boost the International Monetary Fund's coffers by more than $90 billion to push the total new commitments to around $456 billion, according to the IMF.
- JCPenney(JCP) President Michael Francis Steps Down After Just 8 Months.
- Rising European Nationalism Is Destroying The Euro.
- SocGen: China's Housing Market Correction Is 'Sending Shock Waves Through Its Economy'.
- On Egyptian Elections And Israeli Escalations.
- US Retirement Benefits Underfunding Rises To Record $1.4 Trillion.
- Biderman On Europe: "Germany Must Say No To Greece, Spain, & Italy".
- Oracle's(ORCL) Shares Surge on Better-Than-Expected Results. Oracle posted better-than-expected quarterly revenue and authorized an extra $10 billion in share buybacks after a 7 percent jump in sales of new software licenses, helping drive shares higher.
- Electronics Retailers Scramble to Adapt to Changing Market.
- Lost in Recession, Toll on Underemployed and Underpaid. Throughout the Great Recession and the not-so-great recovery, the most commonly discussed measure of misery has been unemployment. But many middle-class and working-class people who are fortunate enough to have work are struggling as well.
- Debt crisis: Greek government will be forced to seek third bail-out. Greece is expected to ask for a third international bail-out agreement as soon as a government is formed, ramping up the pressure on Germany and Brussels to back the eurozone or break it.
- Spain pleads for ECB rescue as bond markets slam shut. Europe's leaders have vowed to mobilise all possible means to counter the region's escalating crisis after Spain's borrowing costs threatened to spiral out of control.
- France Plans 3% Tax on Investor Dividends This Summer. The tax on dividends distributed to shareholders will be paid by companies, expected to bring in EU800m/yr, without citing anyone. Total, France Telecom, Sanofi may be among the most affected.
- Hong Kong Trade Body Expects 2012 Exports to Fall 3%. The city's exporters remain "pessimistic" about business prospects, citing Edward Leung, chief economist at the Hong Kong Trade Development Council.
- Cut (BRY), (FST), (NOG), (ROSE) and (COP) to Underperform.
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 180.0 -.5 basis point.
- Asia Pacific Sovereign CDS Index 141.50 -6.0 basis points.
- FTSE-100 futures +.19%.
- S&P 500 futures -.07%.
- NASDAQ 100 futures +.12%.
Earnings of Note
8:30 am EST
- Housing Starts for May are estimated to rise to 722K versus 717K in April.
- Building Permits for May are estimated top rise to 730K versus 715K in April.
- (ABCO) 2-for-1
Other Potential Market Movers
- The Spanish Bill Auction, JOLTs Job Openings for April, Germany ZEW Survey, weekly retail sales reports, (ETH) investor conference, (MCK) investor day, (FSL) analyst meeting, Wells Fargo Healthcare Conference, Stifel Nicolaus Internet/Media/Publishing Conference, Raymond James Coal Conference and the Deutsche Bank Consumer Conference could also impact trading today.