- Merkel Warns on Threats as Cameron Steps Up EU Exit Talk. German Chancellor Angela Merkel warned that threats aren’t the way to win arguments in the European Union as Prime Minister David Cameron suggested that failing to get his way may increase the chances of a U.K. exit. After an overnight meeting hosted by Swedish Prime Minister Fredrik Reinfeldt at his country residence in Harpsund, Merkel and Cameron were still at loggerheads over the candidacy of Jean-Claude Juncker to head the European Commission. Merkel urged her fellow leaders to proceed in the “European spirit” to enable compromise.
- Ukraine Peace Talks Progress as Evacuation Route Set Up. Russian, German and Polish officials met in St. Petersburg to advance Ukraine peace talks after President Petro Poroshenko called for an evacuation corridor so civilians can flee fighting in the country’s battle-torn east.
- China Commodity Financing Seen Declining by Goldman Sachs. Foreign banks are projected by Goldman Sachs Group Inc. to lend less money against commodity inventories in China amid a probe into metals stockpiles in the biggest consumer of raw materials. Claims that single batches of copper and aluminum at Qingdao Port were pledged as collateral for multiple loans risks undermining a broader practice in which traders use everything from iron ore to rubber to get funding. The investigation is already weighing down copper prices and may curb foreign exchange inflows to China, according to a report by Goldman.
- World’s Soundest Banks No Immunity for Risks in Canada. Even with the world’s soundest banks, Stephen Poloz is grabbing a microphone to warn about risks to Canada’s economy.
- European Stocks Extend Six-Year High Amid Draghi Optimism. European stocks rose, extending their highest level in more than six years, amid optimism that measures announced by the European Central Bank last week to increase inflation will help propel equities higher. Gemalto NV (GTO) rose 2 percent after saying China Telecom Corp. chose it to supply software for chips that can be used for contactless payments by mobile phone. Bank of Ireland Plc dropped 3.2 percent after U.S. billionaire Wilbur Ross put on sale his remaining shares in the country’s largest lender by assets. Booker Group (BOK) Plc slid 2.2 percent after Goldman Sachs Group Inc. removed the stock from its conviction-buy list. The Stoxx Europe 600 Index gained 0.3 percent to 349.71 at the close of trading, its highest level since January 2008.
- Trampling Democracy to Fight Climate Change. Republicans are calling President Barack Obama's new coal-plant regulations a "power grab." The truth is more complicated, and ominous, than that. This isn't a case where the executive branch has simply gone beyond its authority. It's a case where officials in all three branches of government have found a way to achieve their policy goals while shielding themselves from accountability.
- Higher P/E, Lower VIX Cause U.S. Stock Caution. (graph) Rising valuations and falling volatility suggest the next 5 percent move in stocks will be lower, according to David Bianco, chief U.S. equity strategist at Deutsche Bank AG. The CHART OF THE DAY depicts an indicator that Bianco used to support this conclusion in a June 6 report.
- Inflation Signs Amid Froth Top Sonders’ Stock Worries. In diagnosing U.S. stocks, Liz Ann Sonders generally has given the all-clear sign during the rally in equities over the past five years. So while she continues to believe the U.S. is still in the “middle innings” of a secular bull market, it’s worth listening when the chief investment strategist at Charles Schwab Corp. talks about a few results in the bloodwork that may signal some short-term sickness.
- Militants Overrun Iraq's Second-Largest City As Government Forces Flee. Mosul Strike Is Serious Blow to Baghdad's Efforts to Control Widening Insurgency. Al Qaeda-inspired militants seized control of Iraq's second-largest city on Tuesday in a brazen military operation that underscored the weakness of the Baghdad government across vast swaths of the country. Hours after government forces fled Mosul in disarray following four days of fighting, Prime Minister Nouri al-Maliki declared a nationwide "state of maximum preparedness" but didn't indicate whether government forces were mobilizing to retake the Iraqi city, 220 miles north of the capital Baghdad.
- ‘Just Admit It’: Administration privately concedes risk of Taliban swap, despite Kerry comments. Secretary of State John Kerry's dismissive "baloney" response to whether five Taliban members released from Guantanamo pose a risk to American troops is receiving pushback from, of all places, Obama administration officials. Despite Kerry brushing off such concerns in an interview on Sunday, Fox News is told that administration officials who briefed members of the House on Monday evening were not ready to rule out the possibility that the freed inmates could endanger Americans. Several lawmakers said administration officials admitted Monday there could be some additional risk to Afghan civilians and Americans because the five hardened Taliban members have been freed, in exchange for Sgt. Bowe Bergdahl. Republican Rep. Adam Kinzinger told Fox News that Kerry's claims were "absolutely bewildering," particularly in light of the Monday briefing. He said administration officials told lawmakers that the release "could potentially endanger American soldiers." The administration, he said, has "got to get their message straight." To Kinzinger, there's no question the release poses a risk. "This is putting Americans in danger, it is putting the Afghan people in danger, and just come out and admit it," he told Fox News. "I mean, just admit it and say that you thought this was worth it, but don't try to pretend like it's not an issue."
ZeroHedge:
- The Bubble Is Back. (graph)
- Howard Marks: U.S. equities may face a “day of reckoning. Howard Marks, Oaktree Capital chairman, discusses the current condition of the stock market and when the U.S. equities may face a “day of reckoning.”
- POLL: Fox Is The Most Trusted TV News Source In America. In response to the question, "Which of the following television news sources do you trust the most to provide accurate information about politics and current events?," 25% of survey respondents answered Fox News: MSNBC netted an embarrassing 5% of the vote, including only 10% of Democrats saying it's the most trustworthy.
- China System-Wide Reserve Requirement Cut Unlikely. The probability for China to cut reserve requirements for all institutions seems very small, citing an official with the NDRC.
- Demand for risky mortgages reaches five-year high. More buyers with small deposits are taking out loans worth over 3.5 times their income.
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