Today's Headlines

Bloomberg:

• Trichet Escalates Greece Clash as ECB Puts Onus on Governments for Rescue. Germany stepped up demands that investors share the cost of a second Greek rescue after Jean- Claude Trichet rejected direct involvement by the European Central Bank. “We have to insist on the participation of the private sector,” German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin today, ignoring warnings from credit-rating firms that his proposal to extend Greek debt maturities by seven years would be deemed a default. A working group set up this week is charged with indentifying “a good solution for the involvement of the private sector that can and has to be supported by the European Central Bank,” he said.
• Greece, Portugal, Ireland Credit-Default Swaps Rise to Records. The cost of insuring against default on government debt sold by Greece, Portugal and Ireland rose to records, according to traders of credit-default swaps. Contracts on Greece soared 45.5 basis points to 1,567.5, Portugal increased 11 to 730 and Ireland jumped 20 to 710 as of 4 p.m. in London, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed 10 basis points to 211.5, the highest since Jan. 11. Swaps on Spain rose 14 basis points to 275, Italy increased 9 basis points to 174 and Belgium was up 8 at 153 basis points, according to CMA. France rose 5 basis points to 275. The Markit iTraxx Crossover Index of swaps on 40 companies with mostly high-yield credit ratings jumped 11 basis point to 401, while the Markit iTraxx Europe Index of 125 investment-grade companies rose 3 basis points to 108.75, according to JPMorgan Chase & Co. The Markit iTraxx Financial Index of swaps linked to the senior debt of 25 European banks and insurers rose 7.5 basis points to 167.5 and the subordinated index soared 11 to 288, JPMorgan prices show.
  
• Import Prices in U.S. Unexpectedly Increase on Automobile, Clothing Costs. Prices of goods imported into the U.S. unexpectedly rose in May as increasing costs for consumer goods like autos and clothing overshadowed the first drop in fuel expenses in eight months. The 0.2 percent increase in the import-price index, its eighth consecutive gain, followed a revised 2.1 percent climb in April, Labor Department figures showed today in Washington. Economists projected a 0.7 percent decrease for last month, according to the median estimate in a Bloomberg News survey. Costs advanced 12.5 percent from May 2010, the biggest 12-month increase since September 2008. Growing demand from economies in Asia and Latin America, paired with a weaker dollar, is pushing up the cost of goods from abroad for businesses like Gap Inc. (GPS) “Higher prices given the weaker dollar are something that the economy is going to have deal with going forward,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “Retailers and food vendors are seeing their costs rise.” Glenn Murphy, chief executive officer of Gap, the largest U.S. apparel chain, said his San Francisco-based company needs to work more directly with mills making his company’s clothes because “for 30 years nobody has ever seen this kind of inflation.” “This year we’re dealing with not only some economic headwinds, but obviously we’re dealing with huge inflationary pressure, which has taken our operating margin down,” Murphy said during a June 8 presentation.
• Oil Falls Most in Four Weeks on Saudi Arabia's Plan to Increase Production. Crude oil tumbled the most in four weeks after al-Hayat newspaper reported Saudi Arabia will raise oil production to 10 million barrels a day next month, and on concern the global economic recovery is slowing. Oil declined as much as 3.1 percent as London-based al- Hayat cited unidentified senior OPEC and industry officials as the sources of the Saudi output plan. China reported a smaller- than-estimated trade surplus today. India’s industrial output growth eased in April and U.K. manufacturing dropped. “The expressed intent of the Saudis has been to make up for the missing Libyan barrels and to cap oil prices,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. “In addition to the Saudi news, most economic indicators have been looking terrible.” Crude oil for July delivery declined $2.63, or 2.6 percent, to $99.30 a barrel at 10:56 a.m. on the New York Mercantile Exchange. Prices are down 0.9 percent this week and are 32 percent higher than a year ago. “It’s starting to sink in that the Saudis intend to do what they said, and will increase oil production,” said Rick Mueller, a principal with ESAI Energy, LLC in Wakefield, Massachusetts. “This will ease any supply worries.”
• Greek Debt Crisis Causing Company Bond Sales to Be Pulled as Spreads Widen. Political wrangling over the future of Greece is infecting Europe’s corporate bond market, pushing relative yields to a 2 1/2-month high and forcing borrowers to pull deals. The extra yield investors demand to hold non-financial company debt instead of government securities rose 3 basis points this month to 118, the highest since March 24, according to Bank of America Merrill Lynch index data. Denmark’s Nykredit Bank A/S and Finnish lender Pohjola Bank Plc (POH1S) postponed bond sales yesterday citing market conditions. Nykredit, Denmark’s biggest issuer of mortgage bonds, postponed its sale of senior unsecured bonds because the market “was much weaker” than when the deal was announced, according to Morten Vagnoe, head of debt investor relations. Pohjola Bank delayed its 300 million-euro, 10-year lower Tier 2 notes issue because “market conditions dramatically changed,” said Lauri Iloniemi, head of group funding. “Participation of private creditors in cases of insolvency is indispensable,” Schaeuble told lawmakers in Berlin today, ignoring warnings from credit-rating firms that his proposal to extend Greek debt maturities by seven years would be deemed a default.
• Santander Bond Risk Rises to 3-Month High on Funding Concerns. The cost of insuring against default on bonds sold by Banco Santander SA rose to the highest in three months on concern Spanish lenders may struggle to fund themselves amid the country’s deficit crisis. Credit-default swaps tied to Santander’s senior debt increased 1 basis point to 240, the highest since March 11, according to CMA. The contracts are up from 233 on May 31, when the bank said it was selling public sector covered bonds, and compares with 165 basis points April 11. Managers for the Santander issue last week sold only about half the offering of 1 billion euros ($1.46 billion) of covered bonds backed by loans to Spanish regional and local governments, the Wall Street Journal reported, citing unidentified people familiar with the transaction. Commerzbank AG, HSBC Holdings Plc and Societe Generale SA were left holding the unsold portion, the Journal said. “It’s significant not just to Santander, but it’s significant in that Spanish banks have exposures to regional and local governments in Spain and this may complicate their ability to fund with covered bonds using this as collateral,” said Hank Calenti, head of bank credit research at Societe Generale SA in London.
• Dudley Sees 'Moderate' Growth in Second Half of 2011 After a 'Soft Patch'. Federal Reserve Bank of New York President William C. Dudley said he expects “disappointing” economic growth to improve, even as “downside risks” such as higher commodity prices have increased. “I anticipate that economic growth will pick up enough in the second half of 2011 to sustain a moderate economic recovery,” Dudley, 58, said today in a speech in Brooklyn, New York. “Despite the recent soft patch, economic conditions have improved in the past year.”
• Copper Slides for Third Straight Day on Lower Imports of Metal Into China. Copper fell for a third day in New York on a decline in imports of the metal into China, the world’s largest consumer. Inbound shipments slipped 3 percent in May from the prior month, customs figures showed today, as users drew down inventories and higher London prices made imports more expensive. Prices also retreated as copper inventories tracked by the London Metal Exchange climbed for a ninth week in 10. Copper for July delivery dropped 4.8 cents, or 1.2 percent, to $4.0595 a pound by 8:35 a.m. on the Comex in New York. Prices are down 1.8 percent this week, headed for a second straight slide. China imported 254,738 tons of copper and copper products in May, the figures showed. Deliveries were down 36 percent from a year earlier, according to Bloomberg data. Copper inventories tracked by the LME rose for a fifth day to 477,925 tons, remaining at the highest level since May 2010.
• Brazil Retail Sales Fall First Time in a Year as GDP Shows Slowing Signs. Brazil’s retail sales unexpectedly fell in April for the first time in a year, after higher fuel and food prices prompted consumers to buy less and Latin America’s biggest economy showed more signs of slowing. Retail sales fell 0.2 percent in April from March, after expanding a revised 1 percent in March, the national statistics agency said today. The contraction surprised 26 of 30 economists in a Bloomberg survey who expected sales to expand from the previous month and whose median estimate was for a 0.4 percent growth.
• China Stocks Traded in Hong Kong Fall Most in World This Month. Chinese stocks traded in Hong Kong are the world’s worst performers this month as allegations of fraud at some companies added to concerns that slowing economic growth will hurt corporate profits. The Hang Seng China Enterprises Index of 40 Chinese companies’ H shares has retreated 6.7 percent this month, the most among 91 global benchmark indexes tracked by Bloomberg. A gauge tracking China’s dollar-denominated B shares has plunged 16 percent in June. “Scandals coming out will shake people’s confidence and there will be an overhang on share prices,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversaw $331 billion worldwide as of March 31. The declines are “a reflection that global investors are panicky about global economic prospects and worried about Chinese monetary tightening and its slowdown effects on the real economy,” Lee said.
• Gates Warns of NATO 'Irrelevance' on Defense Cuts. Defense Secretary Robert Gates, in a parting shot to Europe before leaving office this month, said NATO risks “collective military irrelevance” unless U.S. allies contribute more to the alliance’s operations.
• U.S. Urges 'Extreme Caution' as North Korea Opens Economic Zone With China. The U.S. urged other nations to use “extreme caution and vigilance” in doing business with North Korea as China announced it will develop joint economic zones with the country. “We urge transparency, extreme caution and vigilance in any business dealings with North Korea,” said Mark Toner, a spokesman for the State Department, in response to the reports. North Korea announced June 6 that it would create the Hwanggumphyong and Wihwa Islands Economic Zone to “boost friendship with China and expand and develop external economic relations,” North Korea’s state-run Korean Central News Agency said. The Chinese announcement followed yesterday. China is North Korea’s closest ally and a source of economic support as international sanctions against the North’s nuclear program leave it increasingly isolated.

Wall Street Journal:

• Chinese Official's Death Sparks Protests. The mysterious death in police custody almost a week ago of a low-level Chinese bureaucrat who challenged a land deal backed by higher-level officials sparked violent public protests in the central province of Hubei and a shakeup among the local leaders. The violent clashes this week in Lichuan, suppressed by a heavy paramilitary presence, appear to mark the latest tumult in China over land rights.
• As 'Junk' Bonds Fall, Some Blame the Fed. A steep decline in prices of bonds backed by subprime mortgages has spread through the riskiest segments of the credit markets, ending rallies in high-yield corporate bonds and commercial real-estate debt.
• NY Court Says Strip Club Lap Dances Are Taxable.

MarketWatch:

• Pandora Ups IPO Share Count, Price Range. Pandora Media Inc. increased the size and price range of its proposed initial public offering on Friday, upping the total potential take of the deal by 43% ahead of the streaming media company’s public debut, which is expected to take place next week.
• Greek Default is Inevitable. Commentary: Latin American lessons support restructuring debt.

CNBC.com:

• Major Banks Likely to Get Reprieve on New Capital Rules. The world's major banks are likely to get an extra capital charge in the 2 percent or 2.5 percent range, rather than the 3 percent that has been widely reported, according to officials familiar with the discussions.
• Divided OPEC Losing Control of Oil Market. “There was a time when rumors of the break-up of OPEC would have sent the oil price plummeting and would have given equities a boost” said Stephen Lewis, chief economist at Monument Securities in a research note. “OPEC did not break up this week, but the acrimony between members suggested it would no longer function as an effective agency regulate supply in the crude oil market.”

Business Insider:

• Here's What Is Scaring CFOs Right Now.

Zero Hedge:

• Tepper Agrees With Zero Hedge, Sees QE3 Only If S&P "Falls Several Hundred Points". "If (the S&P 500 falls) a couple hundred points and financial conditions tightened maybe they would reconsider... there is no logic to QE3 now and the only result might be more food and energy inflation."
• Kitco Charged With Massive Tax Fraud Scheme, Business Viability In Question.
• Is Greece Preparing to Give Europe The Finger? George Papandreou said that reforms on the political system or the public administration need the voting of Greek people through referendums.

TechCrunch:

• Amazon(AMZN) Shuts Down Associates Affiliate Program in Connecticut Over Online Sales Tax. Similar to a move made in Illinois a few months ago, Amazon has shut down its Associates program in Connecticut after the state imposed a sales tax measure that would tax any purchases made online starting July 1.

CNN Money:

• SEC to Grassley: Drop Dead. Senator Charles Grassley gave regulators more time to reveal details into whether they're miserably failing when it comes to investigating SAC Capital, or merely fumbling the ball. And the SEC didn't want to comply with that?

Rasmussen Reports:

• 67% Believe US in a Recession.

Reuters:

• Lululemon(LULU) Profit Tops Expectations; Shares Jump. Yoga- and leisure-wear retailer Lululemon (LLL.TO) (LULU.O) reported better than expected quarterly results on Friday as online and in-store sales rose, sending its shares up more than 7 percent. It also forecast stronger than expected second-quarter and full-year earnings. Lululemon shares were up 5.94 percent at C$88.88 in Toronto and up 5.84 percent at $91.17 in New York.
• Bin Laden Will "Haunt" America - al Qaeda Deputy. Osama bin Laden's longtime lieutenant, Ayman al-Zawahri, said the United States faces rebellion throughout the Muslim world after killing the al Qaeda leader, according to a YouTube recording posted on Wednesday. In what appeared to be his first public response to bin Laden's death in a U.S. commando raid in Pakistan last month, the Egyptian-born Zawahri warned Americans not to gloat and vowed to press ahead with al Qaeda's campaign against the United States and its allies.

Market News International:

• China should raise interest rates to stabilize inflation expectations and further curb speculation in the property market, citing Xia Bin, an adviser to the People's Bank of China. The government should stick to its tightening policy bias, citing Xia.

Financial Times:

• US Equity Outflows Largest in 10 Months. Retail and institutional investors have withdrawn the most money out of US equity funds since mid-August, according to the latest weekly data from EPFR Global. Retail investors registered their largest redemptions for the year, at $2.1bn for the week ending June 8, said EPFR. It was the largest retail outflow since $2.3bn left the market in the last week of August in 2010 and they have wothdrawn $5.8bn from stocks over the past seven weeks. The total weekly outflow from both retail and institutional funds was $6.3bn, the largest redemption since the week ending August 18 last year.

Bear Radar

Style Underperformer:

• Mid-Cap Growth (-1.36%)

Sector Underperformers:

• 1) Oil Service -2.36% 2) HMOs -2.0% 3) Homebuilders -2.0%

Stocks Falling on Unusual Volume:

• CHU, BBL, AZN, PFE, SHLM, DIOD, AMRN, HOGS, HTHT, PLXS, INDB, DTSI, SFSF, IPXL, NANO, EXPD, VOD, TNAV, CHTR, SPRD, DWA, THOR, ICGE, AREX, PWP, CTB, JKJ, LVB, MTK, JKL, HMN, CHY, KCP, PWB, RZG, RXI, JKK, ITF, CBL, SF, PHK, PEI, DIOD and RLD
  

Stocks With Unusual Put Option Activity:

• 1) NG 2) GNW 3) CHU 4) MAS 5) EWT
  

Stocks With Most Negative News Mentions:

• 1) MEE 2) STI 3) SPG 4) GS 5) CME
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Large-Cap Value (+.82%)

Sector Outperformers:

• 1) Utilities -.13% 2) Oil Tankers -.30% 3) Steel -.42%

Stocks Rising on Unusual Volume:

• VRGY, JVA, LULU, HRBN, NXTM, WPRT, LYV, FAZ, SCO, NUVA, SKF and NXTM
  

Stocks With Unusual Call Option Activity:

• 1) BEXP 2) LULU 3) ITMN 4) ATML 5) ELN
  

Stocks With Most Positive News Mentions:

• 1) BKH 2) QEP 3) NE 4) ZIP 5) SFSF
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Friday Watch

Evening Headlines

Bloomberg:

• Euro May Have to Coexist With a German-Led Uber Euro: Business Class. It appears another rescue is on the way for Greece. It won't solve the currency union's problems. The real threat to the euro isn't that a weak peripheral country like Greece might withdraw in an effort to devalue its way to competitiveness, but rather that Germany might want to pull out. Germany's incentive to leave grows with each bailout, and Berlin could ultimately make a simple calculation that extrication will be less costly than continuing the sacrifice needed to keep the euro.
• Greece's banks face a $32 billion funding gap over the next year should depositors continue to withdraw their money at the current pace, according to Henderson Global Investors. Deposits by businesses and households held in Greek banks have declined more than 17% since December 2009. While the lenders have been able to make up the shortfall by posting collateral at the ECB or calling in loans to foreign banks, they are running out of assets, said Simon Ward, Henderson's London-based chief economist. "The end game is a full-scale bank crisis, so at some point depositors will have to be stopped from withdrawing their funds," said Ward, who helps oversee Henderson's $100 billion of assets. "I can't see what is going to plug the gap. Any new money coming from the European Union or International Monetary Fund is going to be needed for government finances so there seems to be an additional requirement for the banking system."
• Fed Said to Consider Expansion of Capital Reviews. The Federal Reserve may expand its annual review of bank capital beyond the 19 largest financial institutions to push rigorous risk-management standards into more banks, according to people familiar with the discussions. Firms with assets of $50 billion or more would be required to conduct an exam, with boards showing Fed examiners how stock buybacks, dividends, earnings, and new regulations affect capital over several years, said the people, who declined to be identified because the proposal isn’t final. The Fed completed its first annual study of capital plans in March, clearing the way for firms such as Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM) to boost dividends. Bankers, including JPMorgan Chase Chief Executive Officer Jamie Dimon, have criticized stricter federal oversight of the biggest firms, saying new regulations may impair lending and economic growth.
• Maiden Lane Sales Spark Stampede to Dump Risk. Federal Reserve auctions of mortgage securities that the central bank assumed in the rescue of American International Group Inc. are fueling a selloff in credit markets as Wall Street rushes to hedge against losses on stockpiled debt. Declines in credit-default swaps indexes used to protect against losses on subprime housing debt and commercial mortgages accelerated this month, reaching almost 20 percent in the past five weeks as the cost of the insurance climbs, according to Markit Group Ltd. The plunge this week started infecting everything from junk bonds to the debt of financial companies. The Fed has been selling the $31 billion Maiden Lane II portfolio piecemeal after rejecting a $15.7 billion bid from AIG for the entire pool in March. Since then, Europe’s sovereign debt crisis has deepened and the U.S. recovery has shown signs of slowing, with unemployment rising to 9.1 percent, the highest level this year, and the economy growing 1.8 percent in the first quarter, less than forecast. “Dribbling risk into the market makes sense if everything is good and continues to improve,” said Ashish Shah, the head of global credit investments in New York at AllianceBernstein LP, which oversees $214 billion in fixed-income assets. “But when you get yourself into a position where the Street suddenly feels they’re long inventory and the macro backdrop is weaker, now you’re selling into weakness.”
• Hong Kong Auditor Rejected by U.S. as China Blocks Inspections. The Public Company Accounting Oversight Board rejected Hong Kong-based Zhonglei CPA Co.’s application to become a registered U.S. auditor, citing an inability to inspect its work for companies based in China. This was the first time the PCAOB blocked an auditor since toughening rules in October. The decision follows the U.S. Securities and Exchange Commission’s increased focus on Chinese- based companies that trade on American stock markets. Yesterday, the SEC cautioned investors about buying stakes in companies that gain listings through so-called reverse mergers, saying they may be prone to “fraud and other abuses.” “The PCAOB is putting a line in the sand that is telling China very clearly that if you want your CPA firms to be involved in companies listed here in the U.S., you’ve got to agree to ensure that there are high-quality audits, and that means letting us in to inspect,” said Lynn Turner, a former SEC chief accountant who serves on a PCAOB advisory group. The SEC has halted trading in firms such as Guangzhou, China-based Heli Electronics Corp. and Rino International Corp. of Dalian, China, in the past few months. More than 24 companies have disclosed auditor resignations or accounting problems to the SEC since March, Chairman Mary Schapiro wrote in an April 27 letter. As short sellers increased bearish bets against the stock, the Bloomberg Chinese Reverse Mergers Index of 78 shares listed in the U.S. has dropped 43 percent in 2011.
• Government is More to Blame for Weak Recovery Than Fading Stimulus: Echoes by John B. Taylor.
  
• Prudential's Grier Says Fed Oversight of U.S. Insurers Is Science Fiction. Prudential Financial Inc. (PRU) said new global rules for financial firms won’t work and the Federal Reserve’s revised mandate to potentially oversee insurers is science fiction. Prudential Vice Chairman Mark Grier told analysts today that Solvency II and Basel III, the insurer and bank standards being readied by European regulators, will fail in a crisis. In remarks about the Fed’s expanded role, Grier said he refers to systemically important financial institutions, or SIFIs, as “sci-fi,” which is short for science fiction. “Solvency II and Basel III aren’t even going to work,” Grier said today at Newark, New Jersey-based Prudential’s annual investor and analyst conference. “If there’s a crisis everybody’s going to go back to doing stress tests because no one’s going to believe those things.”
• China's Sina(SINA) Extends Stock Losses. Sina Corp., the owner of China’s third-most visited website and the Twitter-like Weibo service, fell for a fifth day in New York, extending losses after the biggest decline since 2008 yesterday. Sina slid 6.1 percent to $90.92 at 4 p.m., the lowest closing price since March 18. It plunged 11 percent yesterday. The MSCI China/Information Technology Index has fallen 6.3 percent this month, compared to a 2.2 percent decline on the benchmark emerging markets index. Allegations of accounting irregularities at some smaller Chinese companies have eroded demand for larger peers including Sina, Baidu Inc.(BIDU) and Sohu.com Inc. (SOHU), which have lost at least 17 percent of their value since the end of April, after reaching record highs that month, according to Aaron Kessler, an analyst at ThinkEquity LLC in San Francisco. Longtop Financial Technologies Ltd. (LFT), a Hong Kong-based software provider, was sued by an investor alleging the company overstated profit margins and concealed adverse facts last month. “There’ve been some accounting concerns in the sector, also concerns of a global economic slowdown that have impacted these names,” Kessler said.
• Bank of Korea Raises Key Interest Rate to 3.25%. The Bank of Korea raised interest rates for a third time this year to rein in inflation that has exceeded its target range and curb record household debt. Governor Kim Choong Soo boosted the benchmark seven-day repurchase rate to 3.25 percent from 3 percent, following quarter-percent increases in January and March, the central bank said in a statement in Seoul today.
• Food Inflation in India May Climb as Government Raises Minimum Crop Prices. Food-price inflation in India, Asia’s third-largest economy, may accelerate after the government raised the prices it pays farmers for food grains and oilseeds, making crops more expensive, economists said. The minimum prices for monsoon-sown crops including paddy, soybeans and corn were increased to help boost planting, the farm ministry said in New Delhi yesterday. The federal government sets the crop prices to assure farmers’ incomes, while selling subsidized grains and cooking oils to the poor. An increase in food prices would add to inflationary pressures in India, where the central bank has boosted interest rates nine times since March 2010. An index measuring wholesale prices of agricultural products advanced 9.01 percent in the week ended May 28 from a year earlier, the trade ministry said yesterday. Overall inflation in India has been above 8 percent for 16 months. The jump in global food costs has pushed 44 million more people into poverty since June 2010, according to a World Bank estimate. Higher prices helped spark the riots across northern Africa this year, toppling Tunisian President Zine El Abidine.
• Lagarde Favored Over Carstens for IMF's Top Post as Nomination Period Ends. Christine Lagarde, who has taken her campaign to head the International Monetary Fund to India and China while keeping her fans posted on Twitter, may be poised to defeat her main rival, Agustin Carstens.

Wall Street Journal:

• Bond Deal May Augur More European Travails. A crack opened in Europe's credit markets last week that could portend deeper trouble for the region's banks and governments. Investors balked at buying a €1 billion ($1.46 billion) bond offering by Banco Santander SA that was backed by debt of Spanish local governments, according to people familiar with the sale. That left a group of big European banks that managed the deal holding roughly €500 million of the debt. The lack of demand, unforeseen by Santander or the managers, underscores the jittery nature of the region's credit markets. That some of the biggest banks in Europe, including Commerzbank AG, HSBC Holdings PLC and Société Général SA, were left holding the bag also demonstrates how easily sovereign risk can spread around the euro zone.
• France to Set Calendar for Possible Lagarde Probe. A French criminal court said it would announce a calendar Friday for reviewing accusations that Finance Minister Christine Lagarde had overstepped her authority. Ms. Lagarde is campaigning for the top job at the International Monetary Fund.
• Report Slams U.S. Nuclear Regulator. The U.S.'s top nuclear-power regulator "strategically" withheld information from his colleagues in an effort to stop work on a controversial proposed waste dump, according to a report by the agency's internal watchdog, a finding likely to inflame debate about how to handle the nation's nuclear waste. The June 6 report by Nuclear Regulatory Commission Inspector General Hubert T. Bell offers an unflattering portrait of the NRC and its leader, Gregory Jaczko, who is described as having a temper that makes it "difficult for people to work with him."
• The Lone Star Jobs Surge. The Texas model added 37% of all net U.S. jobs since the recovery began. Richard Fisher, the president of the Federal Reserve Bank of Dallas, dropped by our offices this week and relayed a remarkable fact: Some 37% of all net new American jobs since the recovery began were created in Texas. Mr. Fisher's study is a lesson in what works in economic policy—and it is worth pondering in the current 1.8% growth moment. Using Bureau of Labor Statistics (BLS) data, Dallas Fed economists looked at state-by-state employment changes since June 2009, when the recession ended. Texas added 265,300 net jobs, out of the 722,200 nationwide, and by far outpaced every other state.
• A Gulf Drilling Revival. Notice how the energy breakthroughs are in oil and natural gas. Exxon Mobil Corp.'s huge new oil discovery in the Gulf of Mexico is good news for domestic energy production, but it's even better news as a sign that last year's panic over the BP spill won't continue to cripple American offshore oil exploration. Every so often, reality triumphs over politics.

CNBC:

• US Regulators Scramble to Warn on Chinese Stocks. Regulators scrambled to warn of the risks surrounding Chinese companies that have listed in the United States through reverse mergers, though critics said the intervention was too little, too late following a series of accounting scandals. Brokerages also continued to crack down by preventing investors from borrowing on margin to buy many Chinese stocks amid concerns about whether they were overvalued. The U.S. Securities and Exchange Commission said Thursday that it was urging investors to review company filings and in particular watch for those who are not required to file financial reports with the regulator, but plenty of investors have already been burned.

Business Insider:

• The Dangerous Indian Supergene Was Just Found In a Military Hospital. It makes bacteria resistant to antibiotics.
• GBTV! Here is Glenn Beck's New Internet Channel(Roger Ailes May Have Good Reason To Be Worried).
  

Zero Hedge:

• US Treasury Burns $90 Billion in 8 Days.
• 30% of People With a 401(k) Have Taken Out a Loan Against It: New All Time Record.
  

IBD:

• Fertilizer Makers Flex Muscle as Crop Prices Rise. Companies like CF Industries (CF), Agrium (AGU) and Potash Corp. of Saskatchewan (POT) have maintained pricing power as demand for crops for food and fuel has grown.

Forbes:

• Extract Baby, Extract! There's No Stopping Canadian Tar Sands Oil.

NY Times:

• Muddy Waters Research Is a Thorn to Some Chinese Companies. Carson C. Block makes even Wall Street cringe. Last week, the founder of the investment firm Muddy Waters Research issued a scathing report on a Chinese forestry company, calling it a “pump and dump” scheme that has been “aggressively committing fraud.” The remarks set off a sharp sell-off in shares of the company, Sino-Forest, prompting Canadian authorities to temporarily halt trading. Since the report, the stock has fallen more than 70 percent, erasing billions of dollars in value from a company whose investors include Paulson & Company, the hedge fund run by the billionaire John A. Paulson. “They overstated assets by billions of dollars and funneled money to an undisclosed subsidiary,” said Mr. Block, whose firm is based in Hong Kong and the United States.

TechCrunch:

• Google(GOOG) Acquires AdMeld for $400 Million.

Time:

• Senate Dems Distance Themselves from the Obama Agenda.

USA Today:

• Retailers Respond as Value Mania Hits Even The Well-To-Do. They make more than $100,000 a year. They're recently back from a vacation to Aruba — via freebie air miles. And they go shopping together for their groceries every week — at Walmart.

Reuters:

• Groups Sue Obama Administration Over Drilling Approval. Environmental law firm Earthjustice, which filed suit on behalf of several groups, claims the Obama administration's approval ignored relevant concerns involved with deepwater drilling.
• Short Bets on U.S. Stocks Rise in Late May. Short interest on both the New York Stock Exchange and Nasdaq rose through the second half of May, the exchanges said on Thursday, suggesting investors added to short positions on expectations of further losses as the market lost ground. Short interest on the NYSE rose 2.17 percent to 13.22 billion shares through May 31, from 12.94 billion shares as of May 13. Short interest on the Nasdaq rose 3.41 percent in the second half of May to 7.25 billion shares, from 7.01 billion shares as of May 13.

Financial Times:

• Powerful People Held to Account for Financial Crisis. Reckless Endangerment: How outsized ambition, greed, and corruption led to economic Armageddon, by Gretchen Morgenson and Joshua Rosner, Times Books, $30 Gretchen Morgenson, a New York Times business report­er and col­umnist, is never one to pull her pun­ches – and certainly not in her new book, Reckless Endangerment, about the causes of our recent “economic Armageddon”, as the book’s subtitle has it. Reckless Endang­erment is written with Josh­ua Rosner, a fin­ancial and policy analyst at Graham Fisher & Company. The gist of the argument is that Fannie Mae and Freddie Mac, the two housing-oriented, government-sponsored entities (GSEs) now in receivership and liquidation mode, and their defen­ders in Congress laid the foundations for the Great Recession. The book is late to the party, but Morgenson says that it “identifies powerful people whose involve­ment in the debacle has not yet been chronicled and it connects key incidents that have seemed heretofore un­related”.
• Traders Flummoxed by Natural Gas 'Flash Crash'. Energy traders have been puzzled by a fleeting plunge in natural gas futures, the latest instance of anomalous price moves following the shift of commodities to electronic platforms. The New York Mercantile Exchange floor had been closed for more than five hours when late on Wednesday Nymex July natural gas dropped 39 cents, or 8.1 per cent, to $4.510 per million British thermal units. After a few seconds, it bounced back up.

Yonhap News:

• South Korean Finance Minister Bahk Jae Wan said the government should use "all possible policy measures" to stabilize prices. Price instability is likely to continue for a while, Bahk told a government meeting.

21st Century Business Herald:

• China's soybean demand may not be as strong as it looks because some domestic companies are increasing imports to obtain funds through letters of credit, citing a company executive. About 10% to 15% of more than 6 million tons of soybean inventories at China's main ports may be inflated by the trade financing, citing a Shenyin & Wanguo Futures Co. manager Lin Xunfeng.

China Business News:

• China may allow the country's three largest oil companies to adjust fuel prices while crude oil costs are below $130 a barrel. Filling stations may be allowed to raise or cut fuel prices when crude oil costs change more than 4% on average over 22 consecutive working days, according to a plan under discussion.

Haaretz.com:

• UN Report: Iran Accelerating Development of Long-Range Missiles. Monitors sent to various countries uncover and document unauthorized activity by Iranian officials. A report by a panel of experts convened by the United Nations reveals that over the past year Iran has stepped up the pace of its efforts to develop long-range missiles. The report by the panel, which was convened a year ago after the UN Security Council imposed stiffer sanctions against Iran in an effort to halt the Iranian nuclear program, has not been officially released. In a campaign led by the United States, the United Nations has shown concern over Iran's development of medium- and long-range missiles in addition to the nuclear program itself. Iran's efforts to develop missiles have therefore been monitored along with Iranian weapons-smuggling operations.

Evening Recommendations
Citigroup:

• Reiterated Buy on (SYMC), target $24.
  

Night Trading

• Asian equity indices are -1.0% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 112.50 -.5 basis point.
  
• Asia Pacific Sovereign CDS Index 117.0 +1.0 basis point.
  
• S&P 500 futures -.32%.
  
• NASDAQ 100 futures -.26%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (LULU)/.38

Economic Releases
8:30 am EST

• The Import Price Index for May is estimated to fall -.7% versus a +2.2% gain in April.

2:00 pm EST

• The Monthly Budget Deficit for May is estimated at -$59.0B versus -$135.9B in April.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The (TRV) investor conference and the (ARRS) analyst conference could also impact trading today.
  

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

Stocks Rising into Final Hour on Short-Covering, Bargain-Hunting, Financial/Commodity Sector Strength

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Light
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 17.30 -7.93%
  
• ISE Sentiment Index 120.0 +53.85%
  
• Total Put/Call 1.08 -7.69%
  
• NYSE Arms .49 -55.46%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 98.33 +1.53%
  
• European Financial Sector CDS Index 114.25 +1.90%
  
• Western Europe Sovereign Debt CDS Index 197.25 +2.42%
  
• Emerging Market CDS Index 217.56 -1.13%
  
• 2-Year Swap Spread 19.0 -1 bp
  
• TED Spread 21.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.
  
• Yield Curve 257.0 unch.
  
• China Import Iron Ore Spot $172.60/Metric Tonne +.52%
  
• Citi US Economic Surprise Index -98.20 +10.5 points
  
• 10-Year TIPS Spread 2.21% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +98 open in Japan
• DAX Futures: Indicating +27 open in Germany

Portfolio:

• Higher: On gains in my Retail, Biotech, Medical and Tech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite global growth worries, emerging markets inflation fears, rising Mideast unrest, Japan nuclear concerns, rising eurozone debt angst and rising food/energy prices. On the positive side, HMO, Oil Service, Agriculture and Road & Rail shares are especially strong, rising more than +1.75%. Cyclicals are outperforming. (XLF) has traded well throughout the day. The 10-year yield is bouncing +6 bps higher to 3.0%. Lumber is gaining +.36%. The AAII % Bulls fell to 24.42%, while the % Bears jumped to 47.67 this week, which is also a big positive. On the negative side, Steel, Airline, Gaming, REIT and Biotech shares are lower on the day. (IYR) has been heavy throughout the day. Oil is rising +.63% and the UBS-Bloomberg Ag Spot Index is gaining +.62%. The US price for a gallon of gas is down -.02/gallon today to $3.73/gallon. It is up .59/gallon in less than 4 months. The Spain sovereign cds is gaining +2.0% to 258.66 bps, the Italy sovereign cds is climbing +2.28% to 161.33 bps, the Portugal sovereign cds is gaining +1.48% to 719.47 bps, the Greece sovereign cds is surging +1.93% to 1,519.28 bps, the Ireland sovereign cds is up +1.2% to 690.83 bps, the Belgium sovereign cds is rising +3.24% to 145.17 bps and the UK sovereign cds is rising +4.3% to 61.84 bps. The Portugal sovereign, Ireland sovereign and Greece sovereign cds are hitting new record highs today. The Citi Latin America Economic Surprise Index remains close to a 52-week low. (SINA), a beloved Chinese momentum stock, has continued to crash on large volume. The Shanghai Composite fell another -1.7% last night and looks to be rolling over again technically. US stocks had become very oversold and today's bounce is welcome. However, breadth isn't that great, volume is light and leadership is poor. Much of today's advance appears to be related to short-covering. As well, none of the fundamentals that have been weighing on equities are showing any improvements yet. This stock bounce could last another couple of days, but we need to see some real improvements in fundamentals before stocks will likely mount a more convincing move higher. I expect US stocks to trade mixed-to-lower into the close from current levels on global growth worries, rising eurozone debt concerns, emerging markets inflation fears, rising Mideast unrest, rising food/energy prices and more shorting.

Today's Headlines

Bloomberg:

• Greece Is Said to Require $65 Billion More in Emergency Loans From EU, IMF. European governments and the International Monetary Fund would lend as much as an extra 45 billion euros ($65 billion) to Greece under an expanded plan to avoid the euro area’s first sovereign default, two people with direct knowledge of the talks said. European estimates put Greece’s 2012-14 financing gap at as much as 170 billion euros, the people said. It would be filled by the loans, plus around 57 billion euros in unspent aid from last year’s bailout, roughly 30 billion euros in asset-sale proceeds and about 30 billion euros in rollovers by creditors. Structuring the rollovers remains the most sensitive part of the package, with European Central Bank President Jean-Claude Trichet warning on a teleconference of euro-area officials yesterday that German calls for a debt exchange might lead rating companies to declare Greece in default, the people said. “It’s hard to imagine something that’s truly voluntary in the current climate,” Bart Oosterveld, managing director for sovereign risk at Moody’s Investors Service, told reporters in Frankfurt today. “The default risks for peripheral European countries continue to increase.”
  
• Greece, Portugal, Ireland Risk Surges to Record, Credit-Default Swaps Show. The cost of insuring against default on government debt sold by Greece, Portugal and Ireland surged to records, according to traders of credit-default swaps. Contracts on Greece soared 30 basis points to 1,522, Portugal increased 16 to 722 and Ireland rose 10 to 690 as of 2:30 p.m. in London, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 4 basis points to 203, the highest since Jan. 12. Swaps on Spain increased 6.5 basis points to 261.5, Italy climbed 6 basis points to 165 and Belgium was 4 basis points higher at 144, according to CMA. The Markit iTraxx Crossover Index of swaps on 40 companies with mostly high-yield credit ratings increased 2 basis points to 395, the highest since March 17, while the Markit iTraxx Europe Index of 125 investment-grade companies rose 1 basis point to a five- month high of 107.25, according to JPMorgan Chase & Co. The Markit iTraxx Financial Index of swaps linked to the senior debt of 25 European banks and insurers climbed 4.5 basis points to 163.5 and the subordinated index jumped 10 to 278, both the highest since March, JPMorgan prices show.
• ECB's Trichet Signals July Interest Rate Increase. The European Central Bank signaled a July rate increase while damping investor expectations for further moves by reiterating a forecast that inflation will fall below its 2 percent limit next year. The euro dropped more than a cent and German government bonds fell after ECB President Jean-Claude Trichet said the central bank hadn’t raised next year’s inflation forecast from 1.7 percent, fueling speculation it won’t increase rates as quickly as previously expected. At the same time, Trichet signaled the bank intends to lift its benchmark in July after keeping it at 1.25 percent today. Latest data confirm “continued upward pressure on inflation” and “strong vigilance is warranted,” Trichet said. “It means that we are in a mode where there might be in the next meeting an increase of rates, but we are never pre- committed. We are not signaling any particular pace for the next decisions on our interest rates.”
• Initial Jobless Claims in U.S. Unexpectedly Rose Last Week. U.S. initial jobless claims unexpectedly rose last week, a sign that the labor market is struggling to gain traction. Jobless claims increased by 1,000 to 427,000 in the week ended June 4, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 419,000, according to the median forecast. It was the ninth consecutive week that claims were above 400,000. Today’s data showed the four-week moving average, a less volatile measure than the weekly figures, fell to 424,000 last week from 426,750. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 2.9 percent from 3 percent, today’s report showed.
  
• Corn Futures Climb to Three-Year High as USDA Slashes Inventory Estimates. Corn jumped to the highest in almost three years after the U.S. Department of Agriculture forecast tighter supplies, as adverse weather hurt crops. U.S. stockpiles before the start of the 2012 harvest may fall to 695 million bushels, the lowest since 1996, even as farmers harvest a record crop, the USDA said. World inventories are projected to drop to the lowest since 2004 next year. Prices have more than doubled in the past year as global production trailed gains in demand for livestock feed and biofuels. “Today’s report should be viewed as very bullish,” Bill Gary, the president of Commodity Information Systems in Oklahoma City, said in a report to clients. Corn “ending stocks were forecast at the second tightest level in history,” based on reserves to cover daily usage, he said. The rally is boosting costs for meat producers including Tyson Foods Inc. (TSN) and ethanol makers such as Poet LLC. Global food prices have climbed in nine of the past 11 months, touching a record in February. Food-price inflation, high unemployment and corruption spurred unrest in northern Africa and the Middle East this year, ousting leaders in Tunisia and Egypt. Corn futures for July delivery rose 20 cents or 2.6 percent, to $7.84 a bushel at 10:34 a.m. on the Chicago Board of Trade. Earlier, the grain touched $7.93, the highest since June 2008.
• Maersk Only Shipper With Europe-Asia Profit as Rates Fall: Freight Markets. A.P. Moeller-Maersk A/S may be the only shipping line to profit from growing trade between Asia and Europe even as rates reach a two-year low. While Maersk is ordering the world’s biggest ships for the routes, companies such as Hapag-Lloyd AG may lose out. Maersk, the largest container shipping line, probably was the only major operator to make money on Asia-Europe trade in the first quarter, said Ben Gibson, a freight derivatives broker in London at Clarkson Plc, the world’s largest shipbroker.
• China's Ministry of Railways, the nation's biggest issuer of corporate debt, is paying a record yield premium to sell bonds as construction of the world's biggest high-speed network strains its finances. The difference between yields on its 10-year notes and similar-maturity Treasuries doubled in the last five months to reach 141 basis points this week, the most in ChinaBond data going back to September 2008. The gap was 140 basis points yesterday, having widened 36 basis points since the ministry reported a first-quarter loss of 3.76 billion yuan on May 4. The rail operator has 2 trillion yuan of borrowings, including 56 billion yuan of bonds falling due by end-2011.
• Muni Bond Holdings Cut by Mutual Funds, Households, Fed Says. U.S. mutual funds, money-market accounts and individuals cut their holdings of municipal bonds as borrowing by state and local governments dropped during the first three months of the year, the Federal Reserve said. The number of municipal bonds outstanding slid by $20.5 billion to $2.9 trillion during the first quarter, the Fed said in a release today. That marked the steepest drop since 1995, according to data compiled by Bloomberg. Holdings by households, the biggest owners of the debt, slipped by $5.6 billion to $1.08 trillion, while those owned by money- market and mutual funds dropped by $23.8 billion.
• Bair Says U.S. Must Avoid Amnesia in Response to Crisis. Federal Deposit Insurance Corp. Chairman Sheila Bair strongly defended higher capital buffers for the biggest banks and said U.S. regulators must guard against pressure to be less vigilant in financial-industry oversight as the nation recovers from the 2008 credit crisis. “I see a lot of amnesia setting in now,” Bair said today during a question-and-answer session at the Council on Foreign Relations in New York, where she discussed her tenure at the FDIC and the government’s response to the worst financial crisis since the Great Depression.
• Crude Oil Futures Rise a Third Day as OPEC Fails to Agree on Output Quotas. Crude oil increased for a third day after OPEC’s failure at a meeting in Vienna to reach an accord on output targets for the first time in at least 20 years. Futures gained as much as 1.7 percent after what Saudi Oil Minister Ali al-Naimi said “was one of the worst meetings we’ve ever had.” Ministers from the 12-nation Organization of Petroleum Exporting Countries were unable to come to an accord in five hours of talks yesterday. Crude oil for July delivery climbed $1.03, or 1 percent, to $101.77 a barrel at 1:45 p.m. on the New York Mercantile Exchange. Prices are up 37 percent in the past year.
• Biofuel From Algae, Wood Chips Approved for Airlines, ATA Says. U.S. safety authorities granted initial approval for biofuel from non-food materials to be blended with traditional jet fuel on commercial flights worldwide, the Air Transport Association said today. Fuel processed from organic waste or non-food materials, such as algae or wood chips, may comprise as much as 50 percent of the total fuel burned to power passenger flights, ATA spokesman Steve Lott and a Boeing Co. (BA) official told Bloomberg. The preliminary approval, granted this week by the Pennsylvania-based American Society for Testing & Materials, may allow Airbus SAS and Deutsche Lufthansa AG (LHA) to carry out a flight they have planned in the coming weeks using one engine powered 50 percent by biofuel from jatropha, camelina and animal waste.
• Dodd-Frank Swaps Rules to Create 'Black Hole' Because of Unresolved Issues. Swaps users may face a “black hole” when Dodd-Frank Act rules take effect next month because too much remains unresolved for markets to operate properly, the Senate Agriculture Committee’s top Republican said. “We don’t even know what a swap is” under the financial overhaul, Senator Pat Roberts said in an interview today at Bloomberg’s office in Washington. The Kansas Republican said the Commodity Futures Trading Commission needs to outline what provisions will apply when Dodd-Frank takes effect, and which will require rule-making that will delay implementation.

Wall Street Journal:

• Carriers Sweat as Texting Cools Off. Growth in the volume of text messaging is slowing sharply, just as new threats emerge to that lucrative source of wireless carrier profits. While U.S. cellphone users sent and received more than 1 trillion texts in the second half of 2010, according to CTIA, a wireless industry trade group, that was just an 8.7% increase from the prior six months. It was the slimmest gain since texting exploded last decade.

MarketWatch:

• Smucker(SJM) Warns of Spike in Production Costs. Jam maker J.M. Smucker, also home to Folgers coffee, Dunkin’ Donuts and Jif peanut butter, said Thursday the cost to make its products will jump 25% over the next 12 months. That is yet another sign consumers will be paying higher prices at grocery stores and that food companies face an uphill battle in trying to contain skyrocketing costs for staple food ingredients.
• Lagarde Supports Bigger IMF Role for China. French Finance Minister Christine Lagarde, a leading candidate in the race to be the next International Monetary Fund chief, said Thursday she agrees with Chinese leaders that the selection of the next IMF head should proceed "irrespective of nationality" and it would be appropriate if Beijing's current representative in the organization played a key role in future IMF management.

CNBC.com:

• Fed Easing Has Helped China and Brazil: El-Erian.

Business Insider:

• Don't Look Now, But The Japanese Nuclear Crisis is Entering a New Phase. In the latest addition to the ongoing Japanese spiral, officials there are considering evacuating more towns as new "hot-spots" of radiation are discovered farther from the foundering nuclear plant. The new locations are far outside the 19 mile radius previously imposed.
• Troika Report Leaked: Prognosis "Bleak" for Greece, Where Reforms Have Come to a "Standstill".
  

Zero Hedge:

• A Classic Technical Signal: China Breaks Down. (graph) China's stock market has broken a long-term flag to the downside. Look out below.
• US Taxpayers About to be Saddled With Another European Bailout Courtesy of AIG(AIG).
• German Federal Constitutional Court to Challenge Greek Bailout, Claims Action is Unconstitutional.
  

New York Times:

• Goldman(GS) Fined $10 Million Over 'Trading Huddles'. Massachusetts regulators have fined Goldman Sachs $10 million, a penalty that stems from an investigation of its research department. As part of the agreement, the bank has also agreed to halt internal meetings between traders and research analysts, gatherings known inside Goldman as “trading huddles.” “We verified that there was a preference of some customers at the expense of others,” William Galvin, the state’s chief financial regulator, said in an interview.

Chicago Tribune:

• CME Group(CME) Eyeing Illinois Exit. The executive chairman of Chicago-based CME Group said the exchange company is considering a move from Illinois, citing the state's corporate tax rate increase. In response to a January move by the Illinois government to raise the state's corporate tax rate to 7 percent from 4.8 percent, CME executive chairman Terry Duffy said he and CME's chief financial officer, Jamie Parisi, were exploring the possibility of moving CME's corporate tax-paying base. CME's threat comes at a time when other Illinois companies, including Caterpillar and Sears Holdings Corp., have raised the possibility of leaving Illinois. Other states have tried to dangle lucrative incentive packages to lure companies, and Illinois has offered up many incentives of its own to successfully retain big companies like Motorola Mobility. The result has resembled a national bidding war for some of Illinois' top companies.
  

CNN Money:

• Source: Weiner Told NY Colleague He Doesn't Plan to Resign, Citing Polling and Wife.

Real Clear Politics:

• Europe is Warning Us. All this European turmoil raises a paradox. If dispirited Europeans are conceding that something is terribly wrong with their half-century-long experiment with socialism, unassimilated immigrants, cultural apologies, defense cuts and post-nationalism, why in the world is the Obama administration intent on adopting what Europeans are rejecting?

Reuters:

• Deutsche Bank Has Not Cut Exposure to Greece. Deutsche Bank has not significantly cut its exposure to Greek government bonds, a spokesman said on Thursday. "We have kept to the agreement," the spokesman said, referring to the commitment of the German financial industry made last year to keep existing loans to Greece and Greek banks until 2012.
• Fed's Plosser Warns of Inflation Risks from QE. Senior U.S. Federal Reserve official Charles Plosser warned on Thursday of the risks to future inflation from its program of quantitative easing and reiterated that the bar for more stimulus for the economy was "very high." Charles Plosser, President of the Philadelphia Federal Reserve Bank and a policy voter at the Fed this year, said he believed that as the US economy improved, the potential for a rise in inflation was "quite large." "There's about 1.5 trillion dollars of what we call excess reserves in the banking system: they're just sitting there, they're not creating inflation, at least not yet. But they do have the potential to do that," he told Britain's BBC radio.

Handelsblatt:

• The European Central Bank should "give up its blockade against any kind of debt rescheduling" for Greece, Gerhard Schick, finance policy spokesman for the opposition Green party in German parliament, said. Giving further aid to Greece should serve the goal of reaching debt levels that are sustainable in the long run, Schick said, adding that proposals on Greece laid down by Finance Minister Wolfgang Schaeuble fail to reach that goal.

Shanghai Daily:

• Rising Food Prices See Cut in Chinese Consumer Spending. CHINESE bankcard holders trimmed their non-essential spending in May due to rising food prices caused by a drought that ravaged central and eastern China, an industry index showed yesterday. The bankcard consumer confidence index dipped to 86.11 in May, down 0.28 point from a year ago. It also slipped 0.69 point from April, said China UnionPay Co yesterday. The index tracks expenses of card users, including 200,000 individuals, in affluent cities who frequently use the cards to pay for 90 percent of their expenses. A higher index signals that more bankcards are being used to pay for non-necessity expenditure such as luxury goods and travel. "Bankcard holders are cutting non-necessity consumption as the rise in food prices pushes them to shop less, apart from basic needs," the Shanghai-based firm said in a statement. Prices of pork and vegetables rose as central and eastern China were hit by a drought that lasted two months, UnionPay said. Data from the Ministry of Agriculture showed the agricultural products wholesale index rose to 186.3 at the end of May from 180.1 at the start of the month. The decline in auto sales in the country in May also hit consumer confidence. Passenger car sales fell 6 percent to 1.01 million in May from April on the expiry of incentives, high fuel prices and output cuts by some Japanese auto makers due to the March earthquake and tsunami.