Today's Headlines

Bloomberg:

• EU Stress Tests Face Investor Questions on Stringency. The European Union’s decision to publish the results of stress tests on the region’s lenders was welcomed by shareholders seeking more transparency. Investors still want to know how tough the terms of the tests will be. The studies will be done “institution by institution,” French President Nicolas Sarkozy told reporters at an EU summit in Brussels yesterday. German Chancellor Angela Merkel said it was important to give “maximum transparency.” Asked how the governments would react if the tests revealed shortcomings, she said the EU has “taken precautions,” including a 750 billion- euro ($928 billion) financial backstop. “The problem with the stress testing, in most people’s opinion, is fairly serious: It’s not stringent enough,” said Ralph Silva, an analyst at London-based Silva Research Network, which specializes in financial-services firms. The tests may be “a bit harsher” than similar ones carried out last year, helping to boost market confidence, Morgan Stanley analysts led by Huw van Steenis wrote today. The reviews are “highly likely” to take into account holdings of sovereign bonds, Javier Ariztegui, deputy governor of the Bank of Spain, said in an interview in Santander, Spain, today. Germany’s BdB banking association, which had opposed making the findings public, changed its stance yesterday. It now says publication can “contribute to creating confidence and calming the markets” as long as it doesn’t leave “room for misinterpretation.” In London, the British Bankers’ Association said it still opposes publication of data on individual banks. “The results could be misinterpreted and could lead to a run on a sound bank,” Irving Henry, the BBA’s policy director of prudential capital and risk, said in an interview yesterday. Failure to include sovereign debt exposure would “impact the credibility” of the tests, said Ian Gordon, a banking analyst at Exane BNP Paribas SA in London. “Every piece of withheld data gives skeptics reason to grumble that the tests are not transparent and therefore not meaningful.”
• BP(BP) Said to Seeks at Least $5 Billion of Bank Funding. BP Plc, the target of more than 220 lawsuits over the Gulf of Mexico oil spill, is seeking at least $5 billion in financing to meet compensation payments, according to two bankers approached by the company. BP has asked lenders for one-year credit lines, one of the people said. It is arranging the transactions individually with banks, said the people, who declined to be identified because the talks are private. The financing is in addition to BP’s $10.5 billion of undrawn lines, the people said. The funds may give BP additional flexibility if borrowing in bond markets becomes too expensive after the company’s debt was cut six levels to BBB from AA by Fitch Ratings June 15. The company had $27.7 billion in cash flow from operations in 2009. New financing could come in the form of $5 billion to $10 billion of corporate bonds, CNBC reported yesterday.
• Hedge-Fund Survival Skills to Be Tested by Increased Regulation. Hedge-fund managers and investors gathered in Monaco this week said an overhaul of the U.K.’s financial regulator and new rules proposed by the European Union may prove as hard to navigate as volatile financial markets. “The survival instincts that many hedge-fund managers have in markets they’re also going to have to display in facing up to regulatory challenges,” Rick Sopher, managing director of LCF Edmond de Rothschild Asset Management Ltd., which has invested in hedge funds for more than four decades, said at the GAIM International conference. “They’re going to be subject to some really rash and nasty regulation.”
• Copper Heads for Weekly Decline on Concern About U.S. Rebound. Copper fell in New York and London, heading for a weekly decline, after reports stoked concern that the economic rebound may be weaker than expected in the U.S., the world’s second-largest consumer of the metal. Manufacturing in the Philadelphia Federal Reserve Bank’s region expanded in June at the slowest pace since August, and initial jobless claims rose in the week ended June 12, data showed yesterday. U.S. housing starts fell the most since March 2009 and building permits, a sign of future construction, slid to a one-year low, reports showed on June 16. Futures for September delivery declined 4 cents, or 1.4 percent, to $2.884 a pound at 8:12 a.m. on the Comex in New York. LME copper has slid 14 percent this year on concern about European nations’ ability to reduce budget deficits and steps taken by China, the biggest copper user, to cool its real-estate market.
• Japan Aims to Cut Company Tax to Spur Economic Growth. The government pledged in its medium-term economic plan today to bring the corporate tax rate down to a level “commensurate” with other leading nations. That rate is “about 25 percent,” Yosuke Kondo, parliamentary secretary for the Trade Ministry, said in an embargoed briefing yesterday. Firms in Tokyo pay a levy, including local taxes, of 40.7 percent.
• Bank of Japan's Shirakawa Sees Chinese Bubble Risk. Bank of Japan Governor Masaaki Shirakawa told policy makers today that China’s strengthening recovery is spurring concern that the economy is in a bubble, a Cabinet Office official said.
• Paramo Says ECB Will 'Absolutely Not' Give Capital to Banks. European Central Bank Executive Board Member Jose Manuel Gonzalez-Paramo said the central bank will ‘absolutely not” provide banks with capital should stress tests show they need it. “That is not part of the ECB’s functions,” Gonzalez- Paramo told reporters in Malaga, Spain, today. “It’s up to the governments and national supervisors.”
• Treasury to Gain Expanded Powers in U.S. Financial Overhaul. The U.S. Treasury Department under Secretary Timothy F. Geithner is coming out of the worst economic crisis since the Great Depression with expanded powers to guard against future threats to financial stability. Geithner, who has managed taxpayer bailouts of companies from Citigroup Inc. to General Motors Co., would lead a council to monitor large financial firms under legislation House and Senate negotiators aim to complete by July 4. Lawmakers confirmed the council’s basic functions yesterday and may approve final language next week. Geithner would also get a research unit that could demand data from banks and regulators and a new national insurance office. The Treasury-led council’s role includes identifying companies that might be shut down because they pose a risk to the financial system. That authority, even if well-intentioned, could be used for political ends, said Phillip Swagel, a former Treasury economist who’s now a professor at Georgetown University in Washington. “It’s such an open-ended grant of power,” said Swagel, who worked for Republican Treasury Secretary Henry Paulson. “Do we really want to give that to every future administration?”
• The U.S. job market may disappoint in the months ahead as temporary census workers finish their work, helping to keep interest rates low, said John Harrmann of State Street Global Markets in Boston. After leading job gains in May, the number of census workers declined by nearly 30%, according to weekly data published by the U.S. Census Bureau. "This is a very weak, very lackluster jobs economy," Herrmann, a senior fixed-income strategist, said. After some of the temporary census workers migrate back into the private economy, "I think we're going to be looking at disappointing job gains again" by August and September, he said.
  

Wall Street Journal:

• German Ministry: Publishing Bank Stress Tests Will Be Voluntary. Germany will only publish the results of "stress tests" on banks that agree to the process, the finance ministry said Friday, and won't publicly identify institutions that refuse. "There's great pressure to make them public, because the markets see who has published and who hasn't," said Finance Ministry spokesman Michael Offer in an e-mail to Dow Jones Newswires.
• Citi(C) Seeks $3.5 Billion for Private-Equity, Hedge Fund. Citigroup Inc. is looking to raise approximately $3.5 billion for its private-equity and hedge funds, a person familiar with the situation said Friday.

CNBC:

• Deflation - Not Inflation - May Be Bigger Threat to Economy.
• Gold Settles at Record High for Second Session.
  

NY Times:

• I.M.F. Gives Backing to Spain's Austerity Measures. The International Monetary Fund on Friday gave its blessing to Spain’s efforts to bolster its banks and reduce its budget gap, but stressed that passage of a proposed loosening of labor market rules was crucial to kick-start flagging growth.
• Trim the 'Experts,' Trust the Locals. On Tuesday, The Times ran a front-page article on the chaotic efforts to clean up the oil washing around the Gulf of Mexico. Campbell Robertson reported on an incident in which boats that were supposed to be laying boom were, in fact, anchored on the wrong side of a bay in Louisiana. They were helpless as oil oozed in from the gulf, and BP had no way of contacting the workers to get the boats moving. The article described a cleanup operation that is overwhelmed. “From the beginning,” Robertson wrote, “the effort has been bedeviled by a lack of preparation, organization, urgency and clear lines of authority among federal, state and local officials, as well as BP.”

IBD:

• Obama's Answer To Spill Comes Up Short.

Business Insider:

• Greek Communists Say IMF-Imposed Austerity Means "Dachau Conditions For Life". Don't think a stopgap bailout solved the Greece debt crisis. Greek communists are cranking up the rhetoric against IMF-imposed austerity measures, now calling for war against the Athens government.

Zero Hedge:

• ECRI Index Continues to Plunge, Drops by 2.2 to -5.7, And Just 4.3 Away From "Guaranteed" Double Dip Territory. (graph)

FINalternatives:

• San Diego Puts $150 Million in BlackRock(BLK) Hedge Funds. The San Diego County Retirement Association will invest in $150 million in a pair of BlackRock hedge funds. The $7 billion public pension fund yesterday approved the allocation to the global macro strategies, with $115 million going to the BlackRock Global Ascent Fund and $35 million to the BlackRock Emerging Markets Macro Fund.

Apple Insider:

• Apple(AAPL) Selling 1.2 Million iPads Per Month, Rate Could Double by Holidays. Monthly sales of Apple's new iPad device have been rising steadily over the past several months, prompting the electronics maker to adopt a second supplier of 9.7-inch display panels in anticipation of strong fourth quarter sales that could top 6 million.
  

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-six percent (46%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -21 (see trends).

Politico:

• Issa Has Eye on Subpoena Team. Rep. Darrell Issa, the conservative firebrand whose specialty is lobbing corruption allegations at the Obama White House, is making plans to hire dozens of subpoena-wielding investigators if Republicans win the House this fall.

Seeking Alpha:

• Ban Naked Short-Side Derivatives Now.

Reuters:

• German-Spanish Whispering Wars Hit Eurozone. A whispering war between German and Spanish officials has exacerbated the euro zone's debt crisis this month, keeping financial markets on edge and exposing deep frustrations in Berlin and Madrid. European diplomats say the background to the leaks and counter-leaks lies in pressure from Germany -- Europe's economic powerhouse and main paymaster -- for Spain to take tougher austerity measures to cut its huge budget deficit.
• FACTBOX - Iran's Crude Oil Buyers in Europe, Asia.
  

Financial Times:

• Merkel Set to Lose Control of Upper House. Angela Merkel, Germany’s embattled chancellor, looks set to lose her hold on the German parliament’s upper chamber, making legislation even tougher for her fractious coalition of Christian and Free Democrats. Social Democrats and Greens in North Rhine-Westphalia agreed to forge a minority government in Germany’s biggest region, a move which would oust a Merkel-ally as state premier and shift crucial Bundesrat votes to the “red-green” opposition. The power shift in the upper chamber means Ms Merkel will have to clear more hurdles with laws about which the Bundesrat has a say.
• Housing Boom Fuels Corruption in China. China’s push to build cheap housing for low-income families is being undermined by some local governments that are using the policy as a front to provide public officials with sweetheart property deals. In Xinzhou, an industrial town in Shanxi province’s coal belt, a new complex of smart apartments called Century Garden was on the local government’s list of designated social housing. The scandals are becoming the latest flashpoint in the combustible politics of China’s housing boom, which has transformed the living conditions of tens of millions in the past decade but which is increasingly creating a disaffected rump of citizens left out of the real-estate bonanza. “You are never going to get rich if you do not do anything illegal,” says Wang Zhu, a 60-year-old former policeman who has a three-room, brick house across the road from Century Garden in Xinzhou and runs a small flower shop. Social housing has become one of the Chinese government’s main priorities, including the promise to build 5.8m apartments for low-income families this year. The goal is to reduce social tensions surrounding the rapid rise in house prices, while ensuring that the clampdown on property speculation does not cause a collapse in real-estate construction, one of the main drivers of economic growth.

Handelsblatt:

• Business tax receipts in German municipalities fell 20% in the first quarter from a year earlier, citing data from the Federal Statistics Office in Wiesbaden.

Bear Radar

Style Underperformer:

• Mid-Cap Value (-.26%)

Sector Underperformers:

• Hospitals (-1.35%), Airlines (-1.12%) and Gaming (-1.08%)

Stocks Falling on Unusual Volume:

• WBD, VVUS, MNTA, LNCR, CSTR, LINTA, WBD and HCP
  

Stocks With Unusual Put Option Activity:

• 1) CAL 2) EP 3) HK 4) EWJ 5) SII
  

Stocks With Most Negative News Mentions:

• 1) BP 2) TASR 3) FNM 4) ADLR 5) XOM
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+.61%)

Sector Outperformers:

• Gold (+1.70%), Oil Service (+1.70%) and Networking (+.74%)

Stocks Rising on Unusual Volume:

• CDE, CATY, CMA, AMLN, ALKS, CTEL, ZUMZ, AIPC, GIFI, RBCN, CRUS, HTWR, BBBY, IRWD, VECO, VRTX, BOBE, ISLN, MRTN, CVA, TNC, WAG, TOD and NVO
  

Stocks With Unusual Call Option Activity:

• 1) CMA 2) AMLN 3) CRUS 4) GFI 5) ALTR
  

Stocks With Most Positive News Mentions:

• 1) AAPL 2) GENZ 3) CAT 4) GOOG 5) C

Friday Watch

Evening Headlines
Bloomberg:

• EU to Push Levies on Banks, Financial-Transactions Tax at G-20. European Union leaders vowed to push for global taxes on banks and financial transactions, setting the stage for a conflict over worldwide regulation at next week’s Group of 20 meeting. With Germany, Britain and France pledging to impose levies on their own banks and to clamp down on financial speculation, the EU called for global taxes that have run into opposition from G-20 powers such as China. “We want a system of levies and taxes for financial institutions to ensure fair burden-sharing and rein in systemic risks,” German Chancellor Angela Merkel told reporters after an EU summit in Brussels yesterday. “We also want a global system.”
• Medvedev Says He 'Cannot Rule Out' Collapse of Euro. Russian President Dmitry Medvedev says he can’t rule out the collapse of the euro as the European Union struggles to contain the sovereign debt crisis. Asked if the emergency could threaten the single currency, Medvedev said, “So far, no. But one cannot rule out this danger because at least a unique situation has emerged,” according to the text of an interview with the Wall Street Journal that was provided by the Russian government. Commenting on the oil spill that forced London-based BP to set aside $20 billion for potential damages, Medvedev suggested the disaster could lead to the company’s breakup and said he wanted to assure that the interests of Russian shareholders in the TNK-BP venture are safeguarded. The venture, which accounts for almost a quarter of BP’s output, is half-owned by Russian billionaires, including Viktor Vekselberg.
• JPMorgan(JPM) Pressed for More Data on Fannie, Freddie Loan Buybacks. The Securities and Exchange Commission pressed JPMorgan Chase & Co. to tell investors more about mounting demands to buy back defective mortgages, an obligation that cost the four biggest U.S. lenders about $5 billion last year. The SEC asked the New York-based company to disclose more about reserves set aside to cover the cost of repurchasing bad loans it sold to Fannie Mae, Freddie Mac and other investors, according to a Jan. 29 letter released today. The SEC also told the bank to provide more details on when and how it recognizes losses on mortgages that have been modified as well as on soured credit-card debt. “What they’re asking for is a lot more than the banks put out in the public domain right now,” said Christopher Whalen, a bank analyst at Torrance, California-based Institutional Risk Analytics. “This is going to make life uncomfortable for a lot of the banks, because once they start mandating this kind of disclosures, it’s going to stay.”
• UAW's New President Focuses on Organizing Toyota's U.S. Workers. Bob King, new president of the United Auto Workers union, said organizing the U.S. factory workers of foreign companies such as Toyota Motor Corp. is his top priority. “If we don’t support Toyota, Honda, Nissan, Hyundai, Kia and all the non-union plants by supporting the right to organize, we cannot win back the concessions we have given up,” King said yesterday in his first address to delegates at the UAW’s constitutional convention in Detroit.
• Times Square Suspect Shahzad Indicted in Bomb Attempt. Faisal Shahzad, accused in the attempted May 1 car-bombing of New York’s Times Square, was indicted on 10 terrorism-related charges by a federal grand jury, Manhattan U.S. Attorney Preet Bharara said. Shahzad, 30, was charged with attempted use of a weapon of mass destruction in today’s indictment, which disclosed new details about the failed plot. He has been held without bail since appearing before a federal magistrate on May 18, when he was assigned a lawyer. In the indictment, prosecutors added five new charges to their case against Shahzad, including conspiracy counts and an attempted terrorist act transcending national borders. He was also charged with criminal possession of a 9 mm Kel-Tec rifle, which was found loaded in his car the day of his arrest. “The facts alleged in this indictment show that the Pakistani Taliban facilitated Faisal Shahzad’s attempted attack on American soil,” U.S. Attorney General Eric Holder said today in a statement. “Our nation averted serious loss of life in this attempted bombing, but it is a reminder that we face an evolving threat that we must continue to fight with every tool available to the government.”
• Illinois Sells Build Americas as Premium to Treasuries Climbs. Illinois sold $300 million of Build America Bonds at a yield premium over Treasuries about 40 percent higher than two months ago after lawmakers failed to close a $13 billion budget deficit for the year starting July 1. The fifth most-populous U.S. state sold the taxable debt maturing in 2035 priced to yield 7.1 percent yesterday, or 297 basis points over the 2040 Treasury to which it was benchmarked, according to data compiled by Bloomberg. Illinois offered Build Americas of similar maturity at spreads of 205 basis points and 210 basis points in two April issues, Bloomberg data show. Risk aversion among investors amid Greece’s efforts to impose austerity measures contributed to swell the state’s borrowing costs, said Tom Boylen, a managing director and municipal-bond trader in Chicago for BMO Capital Markets. “A lot of this is a global thing,” Boylen said. “There’s a bigger magnifying glass on credit.” The sale took place as the price of insuring Illinois bonds against default climbed to a record. The cost of a five-year credit-default swap to protect Illinois debt rose 7 basis points to 309.1 basis points, or $309,100 to insure $10 million of debt, according to CMA DataVision, a data provider owned by CME Group Inc.

Wall Street Journal:

• U.S. Debt and the Greece Analogy by Alan Greenspan. An urgency to rein in budget deficits seems to be gaining some traction among American lawmakers. If so, it is none too soon. Perceptions of a large U.S. borrowing capacity are misleading. Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences. Beneath the calm, there are market signals that do not bode well for the future. For generations there had been a large buffer between the borrowing capacity of the U.S. government and the level of its debt to the public. But in the aftermath of the Lehman Brothers collapse, that gap began to narrow rapidly. Federal debt to the public rose to 59% of GDP by mid-June 2010 from 38% in September 2008. How much borrowing leeway at current interest rates remains for U.S. Treasury financing is highly uncertain. At the height of budget surplus euphoria in 2000, the Office of Management and Budget, the Congressional Budget Office and the Federal Reserve foresaw an elimination of marketable federal debt securities outstanding. The 10-year swap spread in August 2000 reached a record 130 basis points. As the projected surplus disappeared and deficits mounted, the 10-year swap spread progressively declined, turning negative this March, and continued to deteriorate until the unexpected euro-zone crisis granted a reprieve to the U.S. The 10-year swap spread quickly regained positive territory and by June 14 stood at a plus 12 basis points. The sharp decline in the euro-dollar exchange rate since March reflects a large, but temporary, swing in the intermediate demand for U.S. Treasury securities at the expense of euro issues. The 10-year swap spread understandably has emerged as a sensitive proxy of Treasury borrowing capacity: a so-called canary in the coal mine. I grant that low long-term interest rates could continue for months, or even well into next year. But just as easily, long-term rate increases can emerge with unexpected suddenness. Between early October 1979 and late February 1980, for example, the yield on the 10-year note rose almost four percentage points. The current federal debt explosion is being driven by an inability to stem new spending initiatives. Having appropriated hundreds of billions of dollars on new programs in the last year and a half, it is very difficult for Congress to deny an additional one or two billion dollars for programs that significant constituencies perceive as urgent. The federal government is currently saddled with commitments for the next three decades that it will be unable to meet in real terms. This is not new. For at least a quarter century analysts have been aware of the pending surge in baby boomer retirees. We cannot grow out of these fiscal pressures. Only politically toxic cuts or rationing of medical care, a marked rise in the eligible age for health and retirement benefits, or significant inflation, can close the deficit. I rule out large tax increases that would sap economic growth (and the tax base) and accordingly achieve little added revenues. With huge deficits currently having no evident effect on either inflation or long-term interest rates, the budget constraints of the past are missing. It is little comfort that the dollar is still the least worst of the major fiat currencies. But the inexorable rise in the price of gold indicates a large number of investors are seeking a safe haven beyond fiat currencies. The United States, and most of the rest of the developed world, is in need of a tectonic shift in fiscal policy. Incremental change will not be adequate. In the past decade the U.S. has been unable to cut any federal spending programs of significance. I believe the fears of budget contraction inducing a renewed decline of economic activity are misplaced. The current spending momentum is so pressing that it is highly unlikely that any politically feasible fiscal constraint will unleash new deflationary forces. I do not believe that our lawmakers or others are aware of the degree of impairment of our fiscal brakes. Fortunately, the very severity of the pending crisis and growing analogies to Greece set the stage for a serious response. That response needs to recognize that the range of error of long-term U.S. budget forecasts (especially of Medicare) is, in historic perspective, exceptionally wide. Our economy cannot afford a major mistake in underestimating the corrosive momentum of this fiscal crisis. Our policy focus must therefore err significantly on the side of restraint.
• Fed Emerging Intact From Challenge to Its Power. As the House and Senate move to finalize regulatory-overhaul legislation, the Federal Reserve has emerged as likely to retain most of the power and independence Fed officials have feared they might lose.
• Merrill Is Launching Online Discount Brokerage.
• Top Senator Sees Little Chance for FedEx(FDX) Unionization Proposal. Proposed U.S. legislation to make it easier to unionize at FedEx Corp. has no chance of clearing Congress, a top Senate Democrat said Thursday, dealing a blow to a lobbying campaign waged by rival United Parcel Service Inc. and the Teamsters union. "I know perfectly well if I put that in the bill ... it's not going to pass," Senate Commerce Committee Chairman John D. Rockefeller (D., W.Va.) said in an interview.
• Motorola's(MOT) Uneven Split. Motorola Inc. is planning to funnel billions of dollars to its money-losing cellphone business when it splits off into a separate company next year.
• Toyota's China Assembly Lines Vulnerable to Labor Unrest. Two work actions hit Toyota Motor Corp.-affiliated suppliers this week in the port city of Tianjin, prompting executives to warn that the company's assembly lines in China are vulnerable to labor turmoil that might disrupt its vehicle production. Toyota's brush with worker unrest follows a wave of strikes and other incidents in southern China that have affected Japan's Honda Motor Co. among other companies. "There is a fairly high risk that this type of unrest might spread to our supply chains in China," a Beijing-based Toyota executive said.
• Consumer Price Drop Squeezes Profits. In what is good news for shoppers but bad news for many companies, U.S. consumer prices fell 0.2% last month from April, even as commodity prices from metal to fuel to food remain higher than they were a year ago. The result: Many companies are finding their profit margins squeezed.
• U.S. Fights Challenge to Health Law. The federal government formally responded to the most serious legal challenge to the health-care overhaul, invoking its powers under the Constitution to regulate interstate commerce and impose taxes. At least 20 state attorneys general, most of them Republicans, have filed suit against the government. The attorneys general, led by Republican Bill McCollum of Florida, say the Constitution doesn't grant Congress the power to require that all Americans carry insurance. Under the health-care law, nearly all legal residents who don't carry insurance will pay a penalty starting in 2014 that gradually increases to at least $695 per person annually or 2.5% of income.
• Army Corps Suspends Permit Program For Surface Coal Mines.
  

Bloomberg Businessweek:

• Behind the Huge Demand for Apple's(AAPL) New iPhone. A timely AT&T promotion helped push consumers—not to mention hardcore "Applephiles"—to clamor for the sleeker, upgraded iPhone 4. A new gadget from Apple (AAPL) is typically cause for a sales jolt, but demand for the latest redesign of the company's popular iPhone has been off the charts. AT&T (T), the smartphone's U.S. carrier, suspended sales of the device on June 16 after more than 600,000 early orders strained company computers. Some calls to Apple's service line weren't answered because of heavy volume. What accounts for such demand?
• Japan's Moneylenders Brace for Losses, Rules Shakeout. Japan’s consumer finance companies face multibillion-dollar losses and an industry shakeout as stricter loan rules that take effect today force them to slow lending, analysts said.

Fox News:

• BP(BP) Bond Deal Would Be Challenging. Banks advising troubled oil giant BP Plc are telling the company that a potential bond deal for the company to raise billions of dollars in new capital isn’t impossible, but would be “challenging,” FOX Business has learned.

NY Times:

• Drilling Moratorium Means Hard Times for Gulf Rig Workers. In addition to the fishermen and hoteliers whose livelihoods have been devastated by BP’s hemorrhaging undersea oil well, another group of Gulf Coast residents is beginning to suffer: the tens of thousands of workers like Ronald Brown who run the equipment or serve in support roles on deepwater oil rigs in the Gulf of Mexico. Mr. Brown, known as Rusty to his friends, is a “shakerhand.” In the rugged vernacular of offshore drilling, that means he monitors the mud flowing back from the drill hole thousands of feet below. He works aboard the Ocean Monarch, which was idled along with 32 other oil rigs when the Obama administration ordered a six-month moratorium on all deepwater drilling after the April 20 Deepwater Horizon disaster. The rig’s owner is now seeking customers in other parts of the world. If the rig moves, Mr. Brown and his fellow motormen, roughnecks and roustabouts will be left behind, jobless, with few alternatives that would pay anything close to the $3,500 to $4,000 a month typical for such jobs.

Business Insider:

• OMG: Leno Is Doing Worse Than Conan!

Zero Hedge:

• Because Parity Is So May 2010: BNP Now Sees EURUSD at .98 by Mid 2011. When the ECB said recently that a slide toward parity would be tantamount to admitting defeat for the euro and the eurozone, we took it somewhat seriously. Which is why we were rather surprised to see that the biggest French bank, and by implication, organization which would suffer massively should the eurozone implode, is out with a EURUSD forecast that goes even beyond parity, and bottoms out at 0.98 by Q2 2011. As we have noted before, it is the very same European banks who are most interested in a destabilized euro, as it would merely entail trillion after trillion in ECB bailouts, providing quarterly bonus make whole packets for all bankers involved. So, without further ado, here is BNP's thesis, which just as easily could have come from Evans-Pritchard:

CNNMoney:

• How Wall Street Reform Falls Short. "One needs to hard wire as much of the regulation in place," economist and Columbia University professor Joseph Stiglitz said last week. "There's good reason to be suspicious that if we delegate to [regulators], we'll have the same kinds of problems we've had in the past." Fisher also warned that lawmakers leave regulators "wiggle room to perpetuate" the concept of "too big to fail.""Why should we think the future could, realistically, be any different - especially with even bigger banks that dominate the financial landscape today?," Fisher asked.

Mish's Global Economic Trend Analysis:

• Cost of Insuring Illinois Debt from Default Hits All-Time High; Illinois Pension Fund Loses $Billions in OTC Derivatives Positions. Congratulations of sorts go to the State of Illinois for having the most hopelessly underfunded pension plans in the US and also one of the biggest per capita budget deficits. Topping off the misery, the Illinois Teachers Retirement System is losing money in risky derivatives bets in what one analyst says amounts to “collecting nickels ahead of the bulldozer.” Given that sorry state of affairs it should be no surprise to discover Illinois Debt Default Insurance Climbs to Record.

Forbes:

• Chinese Investors Tried to Buy Newsweek.

Hussman Funds:

• US Seeing Zero Private Sector Expansion. Wall Street seems to have no concept at all that every bit of growth we've observed over the past year can be traced to government deficit spending, with zero private sector expansion when those deficits are factored out. As I noted last week, if one removes the impact of deficit spending, "the economy has recovered to the point where the year-over-year growth rate since early 2009 now matches the worst performance of any of the 50 years preceding the recent downturn."

Washington Post:

• Let the Hedge Funds Run the Risks. Beginning in the late 1980s, traditional banks began complaining that they were losing market share and profits and all their best people to investment banks, which had cleverly constructed an alternative, or "shadow," banking system that was less regulated and backed by less capital. Their incessant whining and well-financed pleading eventually paid off in the late 1990s, when Congress dismantled the Depression-era wall between the two activities and let banks and investment banks merge. And it all worked splendidly -- until, of course, it didn't.

Politico:

• Democrats Lack Consensus on Climate Bill. Senate Democrats emerged from a special caucus meeting in the Capitol on Thursday with no clear consensus yet on the fate of energy and climate legislation due on the floor before the August recess. Majority Leader Harry Reid of Nevada dedicated an hourlong session to a “full, frank discussion” of three competing proposals for overhauling the nation’s energy policies and trimming greenhouse gas emissions. But senators spoke for so long that they had to bump back a more detailed question-and-answer session for another meeting that’s tentatively scheduled for next week. “We’re not going to tell you today what we’re going to have in this legislation because it’s a work in progress,” Reid told reporters.
• Survey: Obama Disappoints Muslims. President Barack Obama’s efforts to improve diplomatic relations with Muslim nations have not translated into favorable images of the United States in key Muslim countries, according to a survey released Thursday by the Pew Global Attitudes Project. The Pew Global Attitudes survey found that the popularity of the United States remained low, and in some cases decreased, because of continued disagreements over U.S. policies.
  

Reuters:

• China Cites Euro Zone Woes Among Economic Headwinds. The global economy is facing many uncertainties, especially the debt crisis plaguing the euro zone, a senior Chinese official said on Friday.
• US Fed's Kohn Sees Europe Risk, But to Pull Through - WSJ. Europe's fiscal problems are a risk that will have some effect on U.S. growth during the rest of this year and 2011, U.S. Federal Reserve vice chairman Donald Kohn said in an interview with the Wall Street Journal.
  
• White House Moves to Weaken Shareholder Rights - Sources. The White House intervened to weaken a provision in the final financial regulation bill that aims to give shareholders more say on how companies are governed, three people familiar with matter said on Thursday. A select group of lawmakers are merging the Senate's reform bill with the House of Representatives' version.Both bills affirm the Securities and Exchange Commission's authority to adopt so-called "proxy access" rules, which would give shareholders an easier and cheaper way to nominate corporate board directors.But the White House pushed Senate negotiators to modify the measure and only allow shareholders owning at least 5 percent of a company for more than two years to nominate a corporate board director, according to a congressional aide and two industry sources.

Financial Times:

• MetLife(MET) Chief Slams US Financial Reforms. The head of MetLife, the largest life assurer in the US, has criticised the financial reforms being finalised by Congress, saying some measures betray a “total misunderstanding” of the insurance industry and could hit the sector hard. In a video interview with the Financial Times, Robert Henrikson warned of “negative unintended consequences” from a financial overhaul that was too “bank-centric” and failed to take into account insurance companies’ needs. The MetLife chief, who steered the company through the financial crisis without the help of government bail-out funds, said the insurance industry had been “vilified” by Washington, in spite of faring better than the banking sector during the turmoil. “The language that has been worked on has been focused on bank language by bankers or people that have banking knowledge,” said Mr Henrikson. “That language then, without reinterpretation or re­classification . . . could have extremely negative unintended consequences to the insurance industry.” He said insurance groups might have to comply with planned changes to increase the capital banks set aside for derivatives trading, or spin off those businesses altogether, even though their use of those instruments was fundamentally different. Mr Henrikson argued that insurance companies were users rather than providers of derivatives and should be exempted from the new provisions affecting derivatives just like other non-bank entities that buy derivatives to hedge risks. He said the argument that exempting insurers could prompt banks to characterise their derivatives units as insurance “shows a total misunderstanding . . . of how an insurance company operates”. Mr Henrikson, who succeeded Robert Benmosche, the current AIG chief, at MetLife’s helm in 2006, also warned that insurance companies could be caught by the “Volcker Rule” banning financial groups from taking trading bets with their funds.He said the insurer’s general accounts - which contain premiums paid by customers and are invested by the company - could be included in the activities prohibited by the provision.

Telegraph:

• ECB Must Buy 'Hundreds of Billions' of Bonds to Tame Europe's Debt Crisis. Fitch Ratings has warned that it may take massive asset purchases by the European Central Bank to prevent Europe's sovereign debt crisis escalating out of control. Brian Coulton, the agency's head of sovereign ratings, said German members of the ECB appeared to be blocking the sort of muscular intervention in southern European bond markets needed to restore the shattered confidence of investors. "There has been an unwillingness to follow through, and markets are going to want to see the ECB's money. It will require hundreds of billions in my opinion," he told a global banking conference. It has focused its firepower on Greece, mopping up some €25bn of government bonds. This has prevented a collapse of the Greek debt market but at the high political price of letting banks and funds dump their holdings onto the EU taxpayer. The Bundesbank is reportedly irked that French banks have led the rush to the exits while German banks have stuck by a gentleman's agreement to keep their Greek assets. The ECB's council insists that it has "sterilized" all purchases, offering no net stimulus. In effect, the ECB has done little to offset severe fiscal tightening by some eurozone states, and as the M3 money supply contracts. "The ECB commitment seems half-hearted," said Andrew Balls, head of PIMCO's team in Europe. "The European sovereign problem has started to contaminate the European banking sector and the global economy." A smooth auction of €3.5bn of Spanish bonds offered some respite yesterday after a week of stress on the EMU periphery, but Spain had to pay punitive rates. The average yield on 10-year bonds was 4.86pc, a near record spread of 220 basis points over German Bunds. Silvio Peruzzo from RBS said the auction does little to help Spanish banks and firms that have been frozen out the debt markets and face a funding crunch. "The ECB needs to act before contagion becomes endemic. Spain's banking system in at the heart of an ice-storm and there is a risk of 'sudden stop' if they can't roll over debt. We expect intervention, probably in covered bonds," he said. Fitch said European banks must refinance nearly €2 trillion of long-term debt by the end of 2012 in an unfriendly market. "There's an awful lot of debt coming due in 2011 and 2012, and that is becoming a concern," said Bridget Gandy, the agency's banking expert. Smaller banks have put off refinancing in the hope that spreads would fall and are now caught in a vice. Mrs Gandy said the situation could turn serious if global growth falters, tipping Europe into a double-dip recession. David Owen from Jefferies Fixed Income said the eurozone may start contracting again in the second half of the year. He said the "core problem" haunting the European debt markets is that investors have little faith in the EU strategy of forcing states to carry out draconian cuts in the middle of a recession. Mr Owen said these countries need sustained growth to claw their way out of debt-deflation traps, and that will require fully-fledged quantitiatve easing by the ECB, and drastic currency depreciation. "If the euro falls to parity or down to 80 cents against the dollar, we would start to see a solution," he said.
• FSA Chief Hector Sants: banks not 'practicing what they preach'. Banks are not practising what they preach and have failed to learn important lessons from the financial crisis, according to Hector Sants, chief executive of the Financial Services Authority (FSA).

IrishTimes:

• Bank Guarantee Extension Sought. The Irish Government is seeking to extend its bank guarantee scheme until the end of this year in discussions with the European Commission that will be completed this month, Minister for Finance Brian Lenihan said today. Last month, the EU approved the state guarantee scheme until the end of June and analysts expected the Government to seek a further extension. The guarantee was first issued for some €400 billion of bank liabilities at the height of the credit crisis in September 2008, in what then was one of the most extensive scheme of its kind.

Nikkei:

• Global banking regulators plan to require banks to increase capital buffers during periods of economic growth for use during downturns. The Basel Committee on Banking Supervision is scheduled to decide on capital rules as early as July.

China Business News:

• China's exports to Europe have already suffered from the European debt crisis, citing Wang Zhiping, director general of the China Foreign Trade Centre. May export growth to Europe was less than 20%, "far less" than his organization's expectations, Wang said.

Evening Recommendations
Citigroup:

• Reiterated Buy on (PPG), raised estimates, boosted target to $81.

Night Trading

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 126.0 -5.0 basis points.
• Asia Pacific Sovereign CDS Index 127.0 -1.0 basis point.
  
• S&P 500 futures +.04%.
  
• NASDAQ 100 futures +.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note
  

Economic Releases

• None of note

Upcoming Splits

• (DLTR) 3-for-2
  

Other Potential Market Movers

• The (MA) annual meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on Short-Covering, Euro Bounce, Options Expiration, Tech Sector Optimism

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 26.14 +.89%
  
• ISE Sentiment Index 115.0 +74.24%
  
• Total Put/Call .85 -10.53%
  
• NYSE Arms 1.89 +51.70%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 115.59 bps -2.69%
  
• European Financial Sector CDS Index 142.83 bps -6.43%
  
• Western Europe Sovereign Debt CDS Index 143.0 bps +.35%
  
• Emerging Market CDS Index 261.74 bps -3.63%
  
• 2-Year Swap Spread 36.0 +1 bp
  
• TED Spread 45.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
  
• Yield Curve 248.0 -6 bps
  
• China Import Iron Ore Spot $143.10/Metric Tonne unch.
  
• Citi US Economic Surprise Index -15.90 -5.1 points
  
• 10-Year TIPS Spread 2.01% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -21 open in Japan
• DAX Futures: Indicating -13 open in Germany

Portfolio:

• Slightly Higher: On gains in my Technology, Biotech and Medical long positions
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 moves to session highs on another bounce in the euro and tech sector strength. On the positive side, Gold, Computer, HMO and Road/Rail stocks are rising on the day. Market leading tech stocks continue to outperform. On the negative side, Homebuilding, I-Banking, Bank, Steel, Oil Tanker and Coal shares are especially weak, falling 1%+. Cyclical shares are underperforming. (XLF) has underperformed throughout the day. Recent comments from (FDX), (BBY) and (TOL) are worrisome. The rise in the Illinois municipal cds to a record is also a large negative. As well, despite gains in European stocks and declines in some eurozone cds, the Western Europe Sovereign CDS Index is rising slightly. Copper appears to be rolling over again, falling -3%. AAII % Bulls rose to 42.5 this week, while the % Bears fell to 30.7, which is a negative. The Shanghai Composite, after being closed for a few days during the recent global equity rally, re-opened last night and fell -.4%. Today's broad market action is a bit worse than the major averages suggest. (AAPL) and stocks that benefit from its success continue to strongly support the Naz. The market continues to remain resilient in the face of mounting headwinds. The euro appears to be strengthening on short-covering and a deterioration in US economic activity, rather than on improving eurzone prospects. The bounce in the euro, low market exposure by hedge funds, (AAPL) optimism and options expiration are likely the main reasons for today's stock resilience in the face of more bad news. Action over the next couple of days should give a better picture on whether or not the recent rally is sustainable. I expect US stocks to trade modestly lower into the close from current levels on more shorting, rising financial sector pessimism, profit-taking and rising economic fear.

Today's Headlines

Bloomberg:

• Illinois Debt Default Insurance Climbs to Record, CMA Data Show. The cost of insuring Illinois bonds against default rose to a record as lawmakers sought to close a $13 billion deficit in the state’s proposed budget for the year starting July 1. The cost of a five-year credit-default swap for the state rose 2 basis points today to 304.64 basis points, or $304,640 per $10 million of debt, as of 11:50 a.m. in New York, according to CMA DataVision.
• Jobless Claims in U.S. Unexpectedly Rose Last Week. The number of Americans seeking jobless benefits last week unexpectedly rose to a one-month high, indicating firings are staying elevated even as the U.S. economy grows. Initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast. “The labor market is not improving,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York. “If you really are going to have a sustainable recovery, you need the labor market to improve.” The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 3.6 percent in the week ended June 5 from 3.5 percent.
• Manufacturing Expansion in Philadelphia Area Slows. Manufacturing in the Philadelphia region expanded in June at a slower rate than forecast as a measure of factory employment contracted for the first time in seven months. The Federal Reserve Bank of Philadelphia’s general economic index dropped to 8, a 10-month low, from 21.4 in May. The employment index declined to minus 1.5 from 3.2 in April. The Philadelphia Fed’s index of prices paid decreased to 10 from 35.5 in May. Prices received declined to minus 6.5 from 3.5.
• U.S. House Democrats Lobby to Strip Swaps Rule From Overhaul. A coalition of U.S. House Democrats asked their colleagues to remove a derivatives rule from the financial-regulation overhaul bill, intensifying the debate over the provision in the days before its final consideration. Forty-three members of the New Democrat Coalition, a group of 69 self-described “moderate, pro-growth,” members of Congress, today sent lawmakers a letter opposing the plan crafted by Senator Blanche Lincoln that would ban commercial banks from operating swaps-trading desks. The block of Democrats is now aligned with a group of New York Democrats in opposing the provision, which may threaten its inclusion in the final bill. Lincoln, an Arkansas Democrat, has picked up the support of three Federal Reserve Bank regional presidents in the past week and has pledged to fight all efforts to modify or strip the provision. “In my view, banks were never intended to perform these activities in the first place,” Lincoln said last week during her opening statement to the House-Senate conference committee. “It is this economic activity that contributed to these institutions growing so large that taxpayers had no choice but to bail them out in order to prevent total economic ruin.”
• Copper Drops on Concern Over Strength of U.S. Economic Rebound. Copper fell the most in almost two weeks in after reports signaled an uneven economic rebound in the U.S., the world’s second-biggest consumer of the metal. Manufacturing in eastern Pennsylvania, southern New Jersey and Delaware expanded in June at a slower rate than forecast, an economic index showed today. The number of Americans seeking jobless benefits last week unexpectedly rose to a one-month high, according to Labor Department figures. Copper futures for September delivery slid 9.5 cents, or 3.2 percent, to $2.9185 a pound at 10:40 a.m. on the Comex in New York.
• OPEC will reduce shipments this month amid high inventories and slack demand in Europe and North America, according to tanker-tracker Oil Movements. OPEC will ship 23..58 million barrels a day in the four weeks to July 3, down .3% from 23.66 million a day during the period to June 5, the consultant said. "There's precious little evidence that there's any buoyancy in demand, except to the Far East," Oil Movements founder Roy Mason said. "Europe looks dead. Everything west of Suez is pretty dead except for the Americas, isolated pockets like Brazil."
• Pimco's Gross Increases U.S. Government Debt to Six-Month High.
  

Wall Street Journal:

• BP(BP) Chief Says He Wasn't Involved in Well Decisions.
  
• The Bad News About ObamaCare Keeps Piling Up. It's now obvious that many millions will lose the coverage they have.
• Home Builders Drop As Toll Brothers(TOL) Warns of Recent Weakness. Shares of home builders slumped Thursday after Toll Brothers Inc. (TOL) said recent deposits and traffic have been running behind the year-earlier figures, raising worries demand has weakened more than expected. Toll Chief Financial Officer Joel Rassman said late Wednesday that in the past three weeks, the luxury home builder's per-community deposits have been running about 20% behind the comparable period a year earlier, and its per-community traffic has been 3% behind. He said total net signed contracts in the fiscal third quarter will be less than those signed in the fiscal second quarter. Rassman also said demand in recent weeks had been "quite choppy," though the housing market "has emerged from its darkest period of late 2008 through early 2009." In recent trading, Toll Brothers slid 4.8% to $17.88, down 12% over the past three months. Hovnanian Enterprises Inc. (HOV) fell 4.8% to $4.52, and Beazer Homes USA Inc. (BZH) declined 5.6% to $4.35. Meritage Homes Corp. (MTH) lost 4.7% to $17.83, and KB Home (KBH) slipped 3.9% to $12.43. D.R. Horton Inc. (DHI) fell 3.7% to $10.82, and PulteGroup Inc. (PHM) was down 2.8% to $9.48. "The fear out on the Street is that the slowdown seen post tax credit is more than just a hangover and it's the new norm for housing demand," East said. He added that home builder shares could remain under pressure in coming months, as there are "no easily identifiable catalysts to move the builders up" over the summer. Urani said HAMP was supposed to help cut back on defaults, but instead, it's only delaying them like other mortgage modification programs. "We've got a huge pipeline of people who are delinquent, and we're reaching the spot where banks are cycling over and repossessing their homes," Urani said. "We're still seeing inventory rise because of that, especially with sales slowing down after the tax credit expiration. Rising inventory could really pressure prices."
• Lawmakers Bet on Firms They Oversaw. In 2009, amid the federal government's most aggressive intervention in the U.S. economy in decades, some members of key congressional committees placed bets with their own money on the stocks of companies they helped oversee, according to a preliminary analysis by The Wall Street Journal of public disclosure filings made public Wednesday. The disclosures come at a time of heightened scrutiny over the government's role in the economy during the critical moments of the financial crisis in 2008 and 2009. The Journal has reported that some members of Congress or their spouses made bets during 2008 that U.S. stocks and bonds would fall in value.
• Dying on the Vine: Tomato Prices. Tomatoes Go From Shortage to Glut in a Matter of Weeks. In California, harvest time is arriving just as tomato growers in other parts of the U.S. are reeling from a sudden supply glut that is pushing the price for fresh tomatoes sharply lower. Florida farmers who fetched more than $30 a few months ago for a 25-pound box of round, fresh field-grown tomatoes, also known as slicer tomatoes, are now getting $5 or less. The U.S. Agriculture Department estimates that wholesale tomato prices fell to 25 cents a pound in June, down 78% since March. The current price is "the lowest number that I can remember seeing," says Gary Lucier, an agricultural economist and tomato expert at the USDA.

NY Times:

• Security Tops Environment in China's Energy Plan.

Business Insider:

• San Diego May Go Bust. San Diego is the latest city to consider bankruptcy as a result of burgeoning debt associated with pensions and benefits, according to Bloomberg.

Zero Hedge:

• High Frequency Trading Is Now In Business of Frontrunning Each Others Regulatory Capture. To say that the latest bout of regulatory capture-cum-bribery of SEC individuals by the HFT lobby is getting out of hand, would be like hoping to have your limit bid get hit in any stock without some computer subpennying you to death first. As the below post by Themis Trading indicates, soon there will be no SEC employees left for the HFT lobby left to poach, which is why each HFT firm is now designing new algorithms to predict whom their competitors will poach, and front run said poaching.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-six percent (46%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -20 (see trends).
• 46% Rate Obama's Response to Gulf Leak as Poor. Voters are more critical than ever of President Obama's handling of the ongoing Gulf oil spill despite his Oval Office address to the nation Tuesday night laying out what the government has done and intends to do in response. In fact, they're nearly as critical of the president now as they are of BP and Transocean, the two companies responsible for the leak to begin with. The latest Rasmussen Reports national telephone survey of Likely Voters - taken Tuesday and Wednesday nights - finds that 46% of U.S. Voters now give the president a poor rating for his handling of the Gulf situation, the highest level of disapproval yet. That's 12 points higher than two weeks ago and 20 points worse than at the beginning of last month. Thirty-three percent (33%) say Obama is doing a good or excellent job in response to the situation that he calls the worst environmental disaster in U.S. history.

Seeking Alpha:

• The Bad Economic News Is Just Getting Worse. Just consider some of the most recent economic news....

Reuters:

• More Than 90 U.S. Banks Miss May TARP Payments. More than 90 U.S. banks and thrifts missed making a May 17 payment to the U.S. government under its main bank bailout program, signaling a rising number of lenders are struggling to meet their obligations. The statistics, compiled by SNL Financial LC from U.S. Treasury data, showed 91 banks and thrifts skipped the May dividend payment under the Troubled Asset Relief Program, or TARP. It was the first missed payment for 23 of the banks; for the others, it was at least their second miss. The number of banks missing their TARP payments rose for the third straight quarter. In February, 74 banks deferred their payments; 55 deferred last November.
• Europe to Urge Transaction Tax, Bank Levy at G20.
• SandRidge Hedge Fund Down 19% This Year on Natgas. SandRidge Capital, a $1 billion energy hedge fund that also manages money for Citigroup (C), said on Thursday it has lost more than 19 percent on the year after bad bets on U.S. natural gas prices.
• From Hospitals to Free Swimming, UK Halts Spending.
  

Euro Intelligence:

• Why This Crisis Will Go All The Way by Wolfgang Munchau. Whatever the Europeans try to do to alleviate the crisis, it does not work: A blanket bank rescue, a €440bn special purpose vehicle to provide a protective shield, and one austerity package after another. Bond spreads and credit default swap indices continue to rise, and the money market is once again freezing up. This has never happened before to European politicians, who in the past were able to get away with a lot less effort. A statement was usually sufficient to placate the markets. What is going on?

Athens News Agency:

• Greece's private and public-sector union groups will hold a nationwide 24-hour strike on June 29. The strike is being held to protest the government's planned changes to the pension system and labor rules.