Today's Headlines

Bloomberg: 

• Militants Seize Towns as Al-Maliki Fails to Stop Advance. Islamist fighters extended their advance in Iraq, entering two northeastern towns as government forces failed to halt an offensive that triggered concern over a civil war and prompted the U.S. not to rule out airstrikes. Prime Minister Nouri al-Maliki’s security forces left Jalulah and Saaiydiyah after militants called on them to give up their weapons and leave their posts, Al Jazeera reported, citing residents in the towns. The Interior Ministry started to prepare a new plan to defend Baghdad against an attack by members of the Islamic State of Iraq and the Levant, or ISIL, Al Arabiya reported, citing a ministry spokesman.
• Black Banner in Mosul as Caliphate Edicts Rule Iraqi Lives. The Islamist militants who swept into Mosul had a simple message for residents of the northern Iraqi city: The path to a caliphate comes with clear rules. Lots of them.
• Iraq Insurgency Risks Biggest Source of New OPEC Oil, IEA Says. The Islamist insurgency in Iraq highlights the risks to oil supply from a nation forecast to provide about 60 percent of OPEC’s output growth in the rest of this decade, the International Energy Agency said. Iraqi Oil Minister Abdul Kareem al-Luaibi speculated yesterday that U.S. planes may bomb his nation’s north as militants linked to al-Qaeda, who captured the city of Mosul this week, moved south toward Baghdad. The country’s crude output capacity will increase by more than 1.2 million barrels a day in the six years through 2019, the Paris-based IEA estimated in its monthly oil market report today. “While Iraq’s production potential is huge, so are the political hurdles it is facing – and nothing provides a clearer example of that risk than the military campaign,” the IEA said.
• Ukraine Bond Rally Best in Region Signals Mounting Risks. Since Ukraine’s territorial integrity started crumbling in March, the nation’s bonds have outperformed regional peers. For Landesbank Berlin Investment GmbH, that’s unsustainable. “Nobody should buy anything in Ukraine,” Lutz Roehmeyer, who helps manage $1.1 billion of emerging-market assets at the fund manager known as LBB-Invest, said by e-mail June 10.
• China Real-Estate Slump Threatens Li’s Economic Rebound. China’s property industry extended its slump last month as sales and construction dropped and investment growth slowed, threatening to drag on a recovery in the world’s second-biggest economy. Home sales in the January-to-May period fell 9.2 percent from a year earlier by area, after an 8.6 percent decline in the first four months, National Bureau of Statistics data showed yesterday. New property construction dropped 18.6 percent this year through May and residential housing starts fell 21.6 percent by area. The sinking real-estate market may undermine Premier Li Keqiang’s mini-stimulus policies aimed at arresting a slowdown that’s thrown his 2014 growth target into question. The property industry is the biggest downside risk to China’s economy, according to Societe Generale SA. “The housing downturn is still playing out and has shown no sign of turning around,” Yao Wei, China economist at Societe Generale in Hong Kong, said in a note yesterday. “The next few months will still be a tug of war between the housing sector and policy easing.” 
• European Stocks Decline as Violence in Iraq Escalates. European stocks fell as escalating violence in Iraq threatened oil supplies, and U.K. property companies declined. Barratt Developments Plc and British Land Co. slid more than 4 percent as Chancellor of the Exchequer George Osborne pledged to increase the Bank of England’s power to restrict borrowing. Total SA rose as a gauge of oil-related stocks posted the best performance on the Stoxx Europe 600 Index. Geberit AG gained 1.7 percent after Goldman Sachs Group Inc. raised its rating on the maker of toilets and bathroom piping. The Stoxx 600 retreated 0.2 percent to 347.07 at the close of trading, after earlier losing as much as 0.9 percent. The equity gauge fell 0.1 percent this week.
• Treasury Yield Curve Flattens Amid Fed Rate Speculation. The U.S. Treasury yield curve approached the flattest level in almost five years as investors speculated the Federal Reserve may raise interest rates sooner than forecast. Longer-maturity bonds have outperformed this week as signs the U.S. recovery is uneven helped bolster demand for safer assets with extra yield. The difference between five- and 30-year yields fell toward the narrowest since 2009, even as the difference in yields between two- and five-year notes widened.
• Subprime Trading Like It’s ’07 in Car-Loan Bonds: Credit Markets. In response to rising default rates on subprime U.S. auto loans, bond investors are deciding the best thing to do is pile into securities backed by the debt.
• Citigroup(C) Said to Face $10 Billion Request in U.S. Talks. The U.S. Justice Department has asked Citigroup Inc. (C) for more than $10 billion to settle a probe into the lender’s sale of mortgage-backed bonds in the run up to the 2008 financial crisis, according to a person familiar with the negotiations.

Wall Street Journal: 

• The Crisis in Iraq at a Glance.
• Refugee Numbers in Iraq Rise By 300,000 Amid Fighting. New Wave of Refugees Adds to Country's Existing Refugee Population of 500,000.
• France Seeks to Further Tighten Regulation of U.S. Tech Firms. Hoping to Build on Broader Pressure Facing American Web Firms in Europe. 
• Priceline(PCLN) Agrees to Buy OpenTable(OPEN) for $2.6 Billion. Online Travel Company Pays 46% Premium to Add Restaurant Booking Service.

Fox News:

• Daughter of first American killed in Afghanistan learns freed Taliban leader was behind it. Alison Spann was just 9 when she learned her father, a U.S. Marine-turned CIA operative, had become the first American killed in the war in Afghanistan. Thirteen years later, she found out her country had freed the Taliban leader behind his death.

CNBC: 

• Why 'Wall Street excesses' pose 'greatest risk'. (video)
• Oil demand to jump as Iraq pushes prices higher.
• Why That Medical Test Just Cost You 23-Times More.

ZeroHedge: 

• Gruesome Footage Of ISIS Atrocities Reveals Al Qaeda Jihadists "Will Stop At Nothing". (video)
• GM(GM) Flunks Derek Zoolander School For Bailed Out Companies Who Can't Build Cars Good, Recalls All New Camaros.
• UMich Consumer Confidence Drops (Again); Misses By Most In 18 Months. (graph)
• Ukraine PM Warns "Prepare For Russian Gas Cutoff On Monday".
• Iron Ore Prices Hit Fresh 21-Month Lows As Commodity Ponzi Probe Escalates. (graph)
• Unintended Consequences Of Obama's Student Loan Policies.

Business Insider:

• JOHN McCAIN: We Won Iraq — And Obama Lost It. (video)
• Here's What A Jihadist State Would Look Like — And It's Terrifying.
• Chinese Hackers Are Practicing How To Blow Up US Pipelines And Shut Down Power Plants.
• FORMER DEFENSE OFFICIAL: The Obama Administration Is A Cross Between 'Keystone Cops And Amateur Hour'.

CNN:

• ISIS: The first terror group to build an Islamic state? (video) The Islamic State in Iraq and Syria has thrived and mutated during the ongoing civil war in Syria and in the security vacuum that followed the departure of the last American forces from Iraq. The aim of ISIS is to create an Islamic state across Sunni areas of Iraq and in Syria. With the seizure of Mosul, Iraq's second-largest city, and advances on others, that aim appears within reach.

CNSNews.com:

• ISIS Leader to USA: ‘Soon We Will be in Direct Confrontation’. Abu Bakr al-Baghdadi, the leader of the Islamic State of Iraq and Syria (ISIS), issued a rare audio message back on January 21 in which he flatly stated his group’s intention to march on Baghdad and move into “direct confrontation” with the United States. “Our last message is to the Americans. Soon we will be in direct confrontation, and the sons of Islam have prepared for such a day,” Baghdadi said. “So watch, for we are with you, watching.”

Real Clear Politics: 

• Welcome to the Jihadi Spring. 

Reuters:

• Insurgents take two Iraqi towns in eastern Diyala province. Insurgents gained more ground in Iraq overnight, moving into two towns in the eastern province of Diyala after security forces abandoned their posts. Security sources said the towns of Saadiyah and Jalawla had fallen to the insurgents, as well as several other villages around the Himreen mountains, which have long been a hideout for militants.
• ECB's Coeure says no need for QE now as euro zone not in deflation. European Central Bank Executive Board member Benoit Coeure said on Friday that there was no need for the ECB to launch large-scale asset purchases, because the euro zone is not in deflation.

Telegraph:

• 13 planes vanish from radars over Europe. As many as 13 planes flying over Europe vanish from radar screens in an "unprecedented" series of blackouts that lasted 25 minutes with claims air traffic control could have been hacked.
• The Eurozone crisis is not over - it could erupt at any time. The European currency union has lived to see another day but there's no room for euphoria as the crisis is only dormant.