Today's Headlines

Bloomberg:

• Rajoy Sees Reprieve as Spanish Recession Evidence Mounts. Spain will probably secure two more years to tame the largest budget deficit in the European Union (EUBDEURO) as first-quarter data show the effects of the toughest austerity measures in its democratic history. The European Commission will decide tomorrow whether to grant Spain until 2016 to bring its deficit back within the EU limit of 3 percent of gross domestic product. Its verdict is due as a series of releases this week including mortgage lending, gross domestic product and inflation may underline that the construction slump that triggered the nation’s economic crisis in 2008 is far from over.

• Europe Banks Sell Once-Toxic Debt for Subprime Return: Mortgages. The U.S. mortgage bonds that were exported around the globe and triggered the worst financial crisis since the Great Depression are now helping Europe’s banks and governments repair balance sheets after jumping in value. While European banks and governments need to sell assets to raise capital or repay taxpayer-funded rescues, investors are seeking riskier, potentially higher-paying securities as central banks globally push down yields on safer debt. With U.S. home prices rising at the fastest pace in seven years, that has turbocharged demand for non-agency bonds, with subprime-backed debt returning 12.7 percent this year after rallying more than 41 percent in 2012, according to Barclays Plc data.

• Commerzbank Downgraded by S&P on Concern Over Profit. Commerzbank AG (CBK), Germany’s second-biggest bank, had its debt rating lowered one step by Standard & Poor’s on concern the lender will struggle to boost earnings on a sustainable basis.

• European Stocks Rise Most in a Month as AstraZeneca Gains. European stocks advanced, with the Stoxx Europe 600 Index climbing the most in more than a month, as U.S. and U.K. markets reopened following a public holiday. The Stoxx 600 increased 1.3 percent to 308.23 at the close of trading, extending its rally this month to 3.9 percent.

• RBC's Yen Bull Battles Hedge Funds on Bearish Bets: Currencies. Royal Bank of Canada's Adam Cole has a message for hedge funds that have built bets against the yen to the highest since 2007 on speculation the currency's 24% slide since September will continue. "Currency moves that are driven by nothing but layer upon layer of leverage are, in the long run, unsustainable," Cole said in an interview. 

• Zoomlion Says It’s Checking Data After Report on Sales. Zoomlion Heavy Industry Science & Technology Co. (1157), China’s second-largest maker of construction equipment, denied that it falsified sales as alleged in a news report published May 27. That article saying sales were improperly accounted for was “distorted” and “misleading,” Zoomlion said in a Shenzhen stock exchange filing yesterday. KPMG and one other auditor signed off on the company’s 2012 financial report, the Changsha, China-based company said in the statement.

• Pernod Ricard Forecasts Slower China Growth on Weak Economy. Pernod Ricard SA, (RI) France’s biggest distiller, forecast weaker growth in China as slower economic growth weighs on demand and the government’s austerity campaign affects spending on entertainment. 

• Dollar Gains as Economic Data Bolster Bets Fed Will Taper Buying. The dollar strengthened versus the euro and the yen as reports showed U.S. consumer confidence reached the highest level since 2008 and home values climbed, bolstering bets the Federal Reserve will slow its bond buying.

• Home Prices in U.S. Rise by Most Since 2006 in March. The S&P/Case-Shiller index of property values increased 10.9 percent from March 2012, the biggest 12-month gain since April 2006, after advancing 9.4 percent in February, a report showed today in New York. The median projection of 30 economists surveyed by Bloomberg called for a 10.2 percent advance.

• Oil Probe That EU Says Mirrors Libor May Reveal Huge Damage. Oil-price manipulation may have wrought “huge” damage to consumers, the European Union’s antitrust chief said today, as he drew comparisons with EU investigations into rigging of bank rates including Libor.

• Morgan Stanley(MS) Said to Move Asia Hedge-Fund Event to U.S. Morgan Stanley (MS) will hold a gathering in New York to showcase Asian hedge funds to investors after pulling its capital introductions event in China because of the bird flu, said three people with knowledge of the matter.

• Global Tablet Shipments to Outpace PCs by 2015, IDC Says. Global tablet shipments will outpace the entire personal-computer market by 2015, fueled by rising demand for lower-priced and smaller alternatives to Apple Inc. (AAPL)’s iPad, market researcher IDC said. Tablet shipments are expected to surge 59 percent to 229.3 million units this year, from 144.5 million in 2012, Framingham, Massachusetts-based IDC said in a statement today. PC sales will decline 7.8 percent this year, IDC said in a separate statement, worse than its prior projection for a 1.3 percent decrease.

Wall Street Journal:

• U.S. Alleges $6 Billion Money-Laundering Operation. Federal prosecutors have filed criminal charges against seven men who allegedly set up an Internet-based currency and used it to launder $6 billion in criminal proceeds, a sign of growing concern among law enforcement about digital cash.

• Bad Debts Rise at Portugal's Bank. Portuguese banks have strengthened their liquidity and capital levels since the country requested a bailout in 2011, but bad debts continue to rise amid a deep recession, the Bank of Portugal said in a report Tuesday. Portugal's main banks have been reporting an increase in bad debts since the government started implementing austerity under a €78 billion ($100 billion) bailout requested in early 2011. In exchange for the loan from European Union peers and the International Monetary Fund, the country has increased taxes, cut public-sector wages and reduced spending on infrastructure, health and education.

Fox News:

• House panel probes whether Holder misled lawmakers on reporter records grab.

MarketWatch:

• Google(GOOG) Fiber could turn cable, phone giants into boiled frogs, analyst says.

• ‘Arrested Development’ reaction stunts Netflix(NFLX) shares.

CNBC:

• Hard to See Smooth QE Exit in US, Japan: Dallara. It is difficult to see a smooth exit out of quantitative easing in the world's largest economy, the U.S. or Japan, said Charles Dallara, former managing director of Washington-based bank lobby group, the Institute of International Finance.

Zero Hedge:

• The New Tapering Normal Optimism In Charts.

• Schaeuble Warns Of "Revolution" If Welfare Model Threatened.

• Got Wood? A Housing Recovery Built On Faith. (graph)

• Despite Plunge In New Orders, Employees, Wages, And Workweek, Richmond Fed Beats Expectations. (graph)

• Surge In Consumer Confidence To 2008 Levels Sends 10 Year Yield To 2013 Highs. (graph)

• Name This European Nation. (graphs)

• Eric Holder Under Investigation By House Judiciary Committee For Lying Under Oath.

Business Insider: 

• REPORT: Chinese Hackers Have Stolen Plans For Pretty Much The Entire US Military.

• OPEC Is Freaking Out About America's Shale Boom.

• CITI(C): The Stock Market Is Getting Dangerously Close To 'Euphoria' Territory. (graph)

• Loud Explosion Heard After Cargo Train Derails Near Baltimore.

• There Was Some Shady Trading Going On Ahead Of Today's Consumer Confidence Data.

Sober Look: 

• Air cargo industry's woes may point to weakness in Asia's growth. (graph)

Market News International:

• Moody's May Downgrade China Rating If GDP Growth Below 6%. Moody's may downgrade China's sovereign rating if the country's annual GDP growth falls below 6%, citing Tom Byrne, senior vice president of Moody's sovereign risk group.

Reuters:

• Drug resistance in new China bird flu raises concern. The new bird flu strain that has killed 36 people in China has proved resistant to Tamiflu for the first time, a development scientists said was "concerning". The H7N9 virus was found to be resistant to Roche's widely used flu drug in three out of 14 patients who were studied in detail by doctors from Shanghai and Hong Kong. Tamiflu, which is given as a pill, belongs to a group of medicines known as neuraminidase inhibitors that currently offer the only known treatment option for bird flu.

• EU trade chief tells China he won't yield on solar panels. The European Union's trade chief bluntly told China on Tuesday it was wasting its time trying to put pressure on him to drop plans to impose punitive import duties on Chinese solar panels. The European Commission, the EU's executive, accuses China of flooding Europe with cheap solar panels sold at below the cost of production, and intends to impose duties.

• Chicago Fed Midwest factory activity slips in April.

Financial Times:

• Germany’s top banks €14bn short of Basel III capital, says BaFin. Germany’s largest banks were €14bn short of the capital needed to meet incoming Basel III banking rules at the end of last year, according to new estimates by BaFin, the country’s financial regulator. The banks, which include the two largest by assets – Deutsche Bank and Commerzbank – managed to cut their collective capital shortfall from €32bn in the second half of 2012, as lenders responded to pressure from investors to improve their balance sheets ahead of the introduction of the Basel III rule book by 2019.

Telegraph:

• Portuguese bestseller calls for euro exit.

Securities Daily:

• China to Collect 20% Tax on Luxury Vehicles. China plans to begin collecting a 20% luxury tax on vehicles that cost more than 1.7m yuan, citing Luo Lei, deputy secretary general of the China Association of Automobile Manufacturers.