Today's Headlines

Bloomberg: 

• Italian Economy Contracts as French Confidence Stalls: Economy. Italy’s economy shrank more than initially reported in the first quarter and French industrial confidence stalled in May, as the euro area struggled to emerge from a record-long recession. Italian gross domestic product fell 0.6 percent from the previous three months, the Rome-based National Statistics Institute, said today, after a May 15 estimate of a 0.5 percent drop. A French index of sentiment among factory managers was unchanged at 94, while an index of service companies fell to 88 from 89, according to the Bank of France. “We don’t expect recovery this year in Italy or at the European level,” said Silvio Peruzzo, an economist at Nomura Holdings Inc. in London. “It’s no longer a periphery versus core issue, now that we see core countries like France struggling too, while Germany goes on its own path.” The euro-area economy contracted 0.2 percent in the first three months of the year, extending its recession into a sixth quarter, and is forecast to stagnate in the second quarter before returning to growth.
• Italian Bonds Fall as Production Declines; Germany’s Bunds Drop. Italian government bonds fell after reports showing industrial production declined in April and the economy shrank more than initially reported in the first quarter undermined demand for the nation’s assets. Italy’s 10-year yields climbed toward the highest level since April as the data added to concern the country’s recession is deepening. Spain’s bonds slid after El Pais reported that the nation may be given more time to tap funds for its banking bailout program. German 10-year bunds dropped, pushing yields to the highest in more than three months. “There seems to be some negative reaction in Italy after the data,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London. “The data was actually quite bad and that’s putting some pressure on the bonds.” Italy’s 10-year yield rose 10 basis points, or 0.1 percentage point, to 4.30 percent at 4:36 p.m. London time after increasing to 4.39 percent on June 6, the highest since April 5.
• Lira Sinks Most in Year as Erdogan Warns Protesters, Bankers. Turkey’s lira weakened the most in more than a year and bank stocks plunged as Prime Minister Recep Tayyip Erdogan warned demonstrators and lashed out against financial speculators for seeking to profit from protests against his government. The currency slumped 1.2 percent, the most since May 2012, to 1.8980 per dollar at 9:25 p.m. in Istanbul. Turkey’s benchmark stock index slid 2.5 percent as Turkiye Garanti Bankasi AS (GARAN), the country’s biggest lender by market value, lost 3.4 percent.
• Corporate Credit Swaps in U.S. Rise Amid Debate on Fed Stimulus. A gauge of U.S. corporate credit risk rose amid debate on when the Federal Reserve will reduce its unprecedented stimulus efforts. The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, increased 1.4 basis points to a mid-price of 82.4 basis points at 12:18 p.m. in New York, according to prices compiled by Bloomberg. The index added 1.9 basis points last week. The risk premium on the Markit CDX North American High Yield Index increased 8.9 basis points to 412.6 basis points, Bloomberg prices show. 
• Crude Declines From Two-Week High on China Data. West Texas Intermediate crude slid from a two-week high after industrial production slowed in China, the world’s second-biggest oil-consuming country. “The Chinese economic news is bearish,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “With the run-up we had, people are just feeling that maybe it’s a little too much given the economic situation especially in China.” WTI for July delivery slid 23 cents, or 0.2 percent, to $95.80 a barrel at 12:50 p.m. on the New York Mercantile Exchange.
• IRS Firings for Employee Misconduct Reach 11-Year Low. The Internal Revenue Service, under a congressional microscope for conference spending and improper scrutiny of small-government groups, has fired fewer workers for misconduct this year than at any time since 2002. 

Fox News: 

• US snooping is slippery slope to abuse of civil liberties.

MarketWatch: 

• The charts that have some worried over China.
• Homebuilders to Bernanke: Fail.

CNBC:

• 'Almost Every Major Asset Class in the World Is Overpriced': Analyst.
• As Investors Return to Jumbo Mortgages, Big Banks Sell. (video)

Zero Hedge:

• May Hedge Fund Performance Update: Ben Bernanke Keeps Crushing it. 
• How The Fed, Courtesy Of Foreign Banks, "Grew" The US Economy By $146 Billion In The First Quarter. (graph)
• Treasury Yields Spike To New 14 Month Highs. (graph)
• The Smoke And Mirrors Are Running Out.
• The Painful Side Of Japan's "Growth Strategy". (video)
• S&P Upgrades US Outlook From Negative To Stable On "Receding Fiscal Risks".

Business Insider:

• Investors Pulled Out Between $2 And $3 Billion At SAC Capital.
• Apple(AAPL) Unveils iOS 7: Here's Everything That's About To Change On Your iPhone And iPad.
• The World Has More Oil And Gas Than Anyone Thought.
• Elon Musk Hung Up On A Reporter Who Asked Him About Battery Costs.
• Hey, Obama, Are You Going To Respond To This Claim That You're Recording 'Nearly All Human Communications'?

Reuters:  

• Fed's Bullard wants Congress to do more on fiscal path.
• EMERGING MARKETS-Brazil stocks slip as Vale, JBS weigh.

Telegraph: 

• House price falls worsen in Greece and Spain. A world league table of property markets has shown values are falling fastest in southern Europe, as a recovery gathered pace in major markets across the globe. Prices in Greece, where the economy has been crippled by the weight of government debt and by austerity measures, fell by 11.8pc in the year to the end of March, according to estate agency Knight Frank. The rate of decline worsened from 9.8pc a year earlier. Other countries in the so-called PIIGS countries - Spain (-7.9pc), Portugal (-6.9pc), Italy (-4.1pc) and Ireland (-3pc) - were also among the weakest markets (see the table below). The fall in the value of Spanish propery was marginally worse than the year before when it was 7.3pc.

Euromoney: 

• China bears re-emerge from the wilderness as credit fears grow. Fears are growing that China’s elevated debt levels, diminishing returns from its bank-financed investment-led growth strategy and slowing GDP prospects mean a credit crisis is in the making.