Today's Headlines

Bloomberg:

• Spain Retail Slump Keeps Exports as Guindos Growth Hope: Economy. Spanish officials predicting an end in the next quarter to the worst recession in the country’s democratic history are pinning that hope on its export recovery as a consumer slump shows little sign of abating. With record unemployment weighing on domestic demand, supermarket chain Eroski sought to kickstart sales last week by cutting prices of 2,000 branded products from olive oil to diapers in more than a third of its 1,500 stores. Such tactics show the pain retailers are willing to endure to revive spending in an economic downturn that started in 2008. 
• European Stocks Rebound as China Allays Crunch Concern. The Stoxx Europe 600 Index increased 1.5 percent to 279.69 at the close of trading, its biggest gain in two months. The benchmark gauge entered a correction yesterday, having slumped more than 10 percent since May 22.
• Obama Seeks Emissions Limits to Revive Climate Proposal. President Barack Obama will attempt a revival of U.S. efforts to tackle climate change today by announcing a sweeping plan that would impose limits on greenhouse gas emissions from all U.S. power plants. The mandatory reductions by operators of power plants, the biggest single source of carbon-dioxide emissions in the U.S., are the centerpiece of Obama’s initiative, which also includes increasing energy efficiency and promoting renewable fuels, according to senior administration officials who briefed reporters on the proposal and asked not to be identified before it was formally released. The officials wouldn’t put a price on the package, which they said can be accomplished without congressional approval.
• Export Bank’s Financing Curbed Under Obama Overseas Coal Pledge. President Barack Obama pledged to end U.S. government financing of overseas coal projects, a promise that could end millions of dollars in support for power plants in nations such as Vietnam and India. As part of a “Climate Action Plan” released today, Obama called for ending U.S. support of foreign coal-fired power plants, unless they are in the poorest nations or have expensive carbon-capture technology. “This is an important move to stand up and say, ‘Coal is not an acceptable fuel source for the 21st century,’” Justin Guay, a Washington representative for the Sierra Club, said in an interview. “It’s a really strong political signal.” 
• Keystone Gains as Study Shows Oil Sands Pose No Added Spill Risk. Heavy crude oil to be carried by the proposed Keystone XL pipeline poses no greater risk of a spill than other types of oil, the National Research Council said in a report. The report disputes arguments made by Keystone opponents that diluted bitumen, a tar-like substance mined in Alberta’s oil sands, is more corrosive than conventional crude oil and is more likely to create ruptures and oil spills in pipelines. The review of spills “did not find any causes of pipeline failure unique to the transport of diluted bitumen,” according to a statement from the council, part of the National Academy of Sciences that advises the U.S. government on science policy. 
• Senators to Offer Bill to End Fannie Mae, Freddie Mac. A bipartisan group of senators is planning to introduce a proposal today for replacing U.S.-owned mortgage financiers Fannie Mae and Freddie Mac (FMCC) with a newly created government reinsurer. The bill to be offered by Senators Bob Corker and Mark Warner reflects a prevailing view among lawmakers that the two government-sponsored enterprises should cease to exist while a federal role in backing mortgage lending should remain. Corker, a Tennessee Republican, and Warner, a Virginia Democrat, have set a news conference for 2:15 p.m. to introduce the measure.
• Kirk’s Cantab Hedge Fund Said to Drop 14% in June Selloff. Cantab Capital Partners LLP, a hedge-fund firm partly owned by Goldman Sachs Group Inc., has lost 14 percent in its main fund this month as bonds and currencies fell, two people familiar with the performance said. The $4.5 billion fund, based in Cambridge, England, dropped 19 percent for the year through June 21, said the people, who asked not to be named because the firm is private. “It’s unusual for one to see a selloff in risk assets and a selloff in bonds at the same time,” Kirk said in an interview. “Being a systematic fund, we had quite a significant exposure to bonds and currencies.” He declined to comment on June’s performance. 
• Consumer Confidence in U.S. Increases More Than Forecast. The Conference Board’s index rose to 81.4, exceeding all forecasts in a Bloomberg survey and the highest since January 2008, from a revised 74.3 in May, data from the New York-based private research group showed today. The median forecast of 77 economists surveyed by Bloomberg called for a reading of 75.1.
• Gold Futures Fall for Second Straight Day on U.S. Economic Data. Gold futures for August delivery slipped 0.2 percent to settle at $1,275.10 an ounce at 1:43 p.m. on the Comex in New York. The metal reached $1,268.70 on June 21, the lowest since September 2010.

Fox News:

• Supreme Court voids key part of voting law, sets up standoff between feds and states. A landmark Supreme Court ruling that struck down a key part of the Voting Rights Act has set up a stand-off between Republican-led states and the Obama administration over controversial voting laws that until now had been stalled. 
• Putin confirms Snowden at Moscow airport, rejects US extradition demands. Russian President Vladimir Putin confirmed Tuesday that NSA leaker Edward Snowden is at the Moscow airport but says since Snowden has not committed a crime in that country, the government will not extradite him back – as requested -- to the United States.

MarketWatch:

• TransUnion: Auto-loan delinquency rate rose in Q1. The first-quarter national auto-loan delinquency rate rose slightly from a year earlier, due primarily to an increase in delinquencies for subprime borrowers, according to TransUnion Corp. The credit-information company said the percentage of auto-loan accounts at least 60 days past due edged up to 0.88% in the first quarter from 0.82% a year ago, but was down from 1% in the fourth quarter. Delinquencies for subprime borrowers climbed to 5.5% from 5.09% last year.

CNBC:

• New Homes Sales Hit Third Straight Month of Gains. Sales of new U.S. single-family homes rose to their highest level in nearly five years in May, confirming the housing market's strengthening tone. 
• Luxury Real Estate Braces for Troubles From China, Brazil. Troubles in emerging markets could stretch to the luxury apartment towers of New York and Miami. Wealthy investors from Brazil and China have been big drivers of the high-end real-estate recovery—especially in New York, Miami and Los Angeles. But now, as emerging markets face slowing economies, sliding currencies and plunging stocks, the high-end real-estate market could feel the chill.

Zero Hedge: 

• Durable Goods Orders Beat Expectations On Boeing Orders. (graph)
• "Flip That House" In These Bubbling Cities. (graph)
• China Is Now More Capitalist Than The US: Main Communist Mouthpiece Says Bailouts Are Bad.
• If H2 2013 Is So Full Of Growth Expectations, Then Why Is This Chart Dropping? (graph)
• Chinese Sovereign Risk Spikes Most Since Lehman. (graph)
• Zillow 30-Year Fixed Mortgage Skyrockets By Massive 50 bps In One Week To 4.38%, Most Since 2011. (graph)

Business Insider: 

• FORMER US OFFICIAL: The NSA Thinks Edward Snowden Copied 'Almost Everything That Place Does'.
• A Regional Breakdown Of The World's Copper Consumers.
• OBAMA: The Keystone Pipeline Should Not Be Approved Unless It Meets Strict Emission Standards.

New York Times:

• U.S. Poised to Sue Corzine Over MF Global. Federal regulators are preparing to sue Jon S. Corzine over the collapse of MF Global and the brokerage firm’s misuse of customer money, DealBook’s Ben Protess reports. The Commodity Futures Trading Commission, the agency that regulated MF Global, plans to approve the lawsuit as soon as this week against Mr. Corzine, the former New Jersey governor who ran the firm until its bankruptcy in 2011, according to law enforcement officials with knowledge of the case.

Reuters:

• Investors slash bullish U.S. bond bets after FOMC -survey.
• Milder forecasts drive U.S. natgas futures to 3-1/2-mth low.

Bear Radar

Style Underperformer:

• Small-Cap Growth +.31%

Sector Underperformers:

• 1) Coal -3.20% 2) Gold & Silver -.53% 3) Medical Equipment -.31%

Stocks Falling on Unusual Volume:

• WAG, BVN, ABX, EVC, EXXI, E, TWC, AVD, BKS, SGEN, TDG, IPCM, SMTC, ISIS, INSM, GHDX, GTU, RPRX, PBYI, TGI, IVR, MELI, SAVE, VRA, CNX, COV, INFI and PRXL

Stocks With Unusual Put Option Activity:

• 1) BKS 2) BK 3) STZ 4) WFM 5) CRF
  

Stocks With Most Negative News Mentions:

• 1) GHDX 2) COH 3) AVD 4) JRCC 5) PEP
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value +1.11%

Sector Outperformers:

• Education +3.51% 2) Homebuilders +2.98% 3) Gaming +2.05%
  

Stocks Rising on Unusual Volume:

• BBEP, HLSS, MLNX, CCL, PHM, IPXL, FSLR, MW, PRLB, NAV, AWAY, BPO, CCL, KBH and JOSB

Stocks With Unusual Call Option Activity:

• 1) NWS 2) VWO 3) CCL 4) BKS 5) PFE
  

Stocks With Most Positive News Mentions:

• 1) FLR 2) QCOM 3) LRCX 4) ZTS 5) PRLB
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Li’s Cash Squeeze Risks 1st China GDP-Goal Miss Since ’98. China’s biggest squeeze on credit in at least a decade is increasing the chance that Li Keqiang will be the first premier to miss an annual growth target since the Asian financial crisis in 1998. Goldman Sachs Group Inc. and China International Capital Corp. yesterday joined banks from Barclays Plc to HSBC Holdings Plc in paring their growth projections this year to 7.4 percent, below the government’s 7.5 percent goal. The cuts followed a tightening in central bank liquidity that yesterday left the overnight repurchase rate more than double the year’s average. “The current leadership is trying to build its reputation in a different way than the previous administration, which felt that its target was holy and had to be met regardless of the circumstances,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong, who previously worked for the World Bank. The danger is that putting the growth goal aside undermines public confidence in China’s economic policy making that’s already been shaken by limited communication on the government’s objectives behind the cash squeeze. The central bank yesterday contributed to the biggest drop in Chinese stocks in almost four years by releasing a week-old statement saying liquidity was “reasonable.” 

• PBOC Opaque Stress Test Catches Funds in Crossfire. China’s lack of transparency during a stress test on the nation’s banks became a cause of worldwide concern as it rocked bond and commodity markets and helped wipe out $4.5 trillion in global equity value.

• China Beige Book Shows Fewer Firms Borrowing as Rates Rise. Chinese bankers are reporting increased lending while fewer companies are taking out loans, an incongruity that helps explain the recent increase in borrowing costs, a private survey showed. The number of companies reporting loan applications in the second quarter fell 13 percentage points from the previous period to 38 percent, the survey from New York-based China Beige Book International said yesterday. The proportion of banks showing higher lending to businesses rose 10 percentage points to 45 percent, indicating that “credit appears to be concentrated on a few borrowers,” according to the report. 

• Morgan Stanley(MS) Cuts Base Metals Outlook as China’s Growth Slows. Morgan Stanley reduced its forecasts for industrial metals on concerns slowing growth in China, the world’s biggest consumer, and the nation’s worst cash squeeze in at least a decade will curb demand. The bank cut its 2013 copper estimate by 3 percent to $3.42 a pound and lowered its nickel prediction by 7 percent to $7.23 a pound, according to analysts Peter Richardson and Joel Crane in a report e-mailed today. Copper for September delivery traded at $3.0285 on the Comex in New York. “The headwinds to commodity price performance have been intensified by growing signs of deterioration in the quality of this lower growth,” the report said. “Strong credit growth in total social financing in China has raised some increasingly serious market concerns about the direction, composition and risks embedded in this development.”   

• U.S. Said to Explore Possible China Role in Snowden Leaks. U.S. intelligence agencies are investigating whether Edward Snowden’s leaks may be a Chinese intelligence operation or whether China might have used his concerns about U.S. surveillance practices to exploit him, according to four American officials. The officials emphasized there’s no hard evidence yet that Snowden was a Chinese agent or that China helped plan his flights to Hong Kong and then to Moscow, directly or through a witting or unwitting intermediary. Rather, they are duty-bound to probe such a worst-case scenario for the U.S., said the officials, who are familiar with the case and asked not to be identified to discuss classified intelligence. 

• Cisco(CSCO) China Sales Vulnerable as Media Urge Domestic Shift. Cisco Systems Inc. (CSCO) faces a backlash in China, where it generates about $2 billion in annual sales, after state-run media said the company poses a security threat and urged a shift toward domestic suppliers. While Cisco has said it didn’t participate in U.S. surveillance programs revealed earlier this month by former government contractor Edward Snowden, state-owned Chinese media outlets are calling for the company to face restrictions there.

• Philippine Stocks Enter Bear Market as Foreign Outflows Surge. Philippine stocks entered a bear market as the nation’s benchmark equity index slumped for a fifth day amid the biggest monthly foreign sell-off on record. The Philippine Stock Exchange Index (PCOMP) fell 2 percent to 5,854.13 at 10:48 a.m. in Manila. The gauge has lost 21 percent since closing at a record 7,392.20 on May 15. Overseas funds sold a net $344 million of Philippines stocks this month through yesterday, heading for the biggest monthly selloff since Bloomberg began compiling the data in 1999.

• Chinese Stocks Plunge as Australian Dollar Falls, Copper Drops. Chinese stocks tumbled deeper into a bear market, dragging the Asian benchmark share-index lower, amid concern a cash squeeze will hurt growth. The Australian dollar weakened and copper declined. The CSI 300 Index (SHSZ300) of the biggest companies in Shanghai and Shenzhen slumped 4.8 percent at 12:40 p.m. in Tokyo, extending yesterday’s 6.3 percent retreat. The MSCI Asia Pacific Index slipped 0.8 percent. Standard & Poor’s 500 Index futures fell 0.3 percent, erasing earlier gains. Currencies in Australia and New Zealand lost at least 0.4 percent versus the greenback, while the yen climbed 0.4 percent to 97.39 per dollar. Copper slid to its lowest level since July 2010.

• Rebar Falls for 2nd Day as China Credit Squeeze Damps Sentiment. Steel reinforcement-bar futures fell for a second day as China’s biggest squeeze on credit in at least a decade increased concern that demand for the construction material will falter. Rebar for delivery in October on the Shanghai Futures Exchange fell as much as 0.8 percent to 3,423 yuan ($557) a metric ton and was at 3,434 yuan at 10:36 a.m. local time. 

• Rubber Futures Swing Amid China Demand Concerns, Weaker Yen. Rubber swung between gains and losses as investors weighed a weaker Japanese currency against China’s biggest squeeze on credit in a decade. The contract for delivery in November on the Tokyo Commodity Exchange gained as much as 1.3 percent and fell as much as 1.1 percent before trading at 230.9 yen a kilogram ($2,364 a metric ton) at 11:57 a.m. Futures touched a nine-month low of 228 yen on June 21.

• Berlusconi’s Sex Conviction Raises Tension in Letta’s Government. Italian Prime Minister Enrico Letta is facing discord among parliamentary supporters after his coalition partner, Silvio Berlusconi, was convicted of paying a minor for sex and sentenced to seven years in prison. The verdict, announced yesterday by Judge Giulia Turri in Milan, was criticized by Deputy Prime Minister Angelino Alfano and Renato Brunetta, chief whip of the second-biggest party in the lower house of parliament. Letta’s own Democratic Party said it would respect the judge’s decision. Berlusconi, a 76-year-old billionaire and former premier, has said he is innocent and remains free as he prepares his appeal. 

• Wall Street’s $8 Billion CMBS in Limbo as Bulls Retreat. Wall Street firms spent the past six months increasing commercial mortgage origination as investors bought the most debt in six years. That’s now backfiring as banks prepare to market $7.5 billion of loans earmarked to be sold as bonds before credit markets took a dive this month. Investors demanded 1.03 percentage point more than the benchmark swap rate to buy new commercial mortgage backed securities tied to shopping malls, skyscrapers, hotels and apartment buildings on June 14, according to data compiled by Bloomberg. That’s up from 72 basis points in February, the narrowest spread since sales revived in 2009, the data show. Lenders’ profits are eroded when values of the securities fall. The CMBS market is poised for its worst month in almost two years after the Federal Reserve signaled it may curb stimulus efforts as the economy shows sign of improvement. That’s complicating efforts by banks to sell new deals and making it more expensive for landlords to refinance loans backed by everything from Manhattan office space to suburban grocery stores.

• Homebuilders Approach Bear Market on Rising Mortgage Rates. U.S. homebuilders fell for a fourth day, approaching a bear market, as concern mounted that rising mortgage rates could restrain a revival in the housing market. The 11-member Standard & Poor’s Supercomposite Homebuilding Index slid 1 percent today to the lowest level since the end of 2012. It has fallen 19.6 percent from a May 14 peak, close to the 20 percent threshold considered to be a bear market.

Wall Street Journal:   

• China's 'Shadow Banks' Fan Debt-Bubble Fears. In a 52-story office tower overlooking the leafy streets of this city's embassy district, some 400 deal makers at Citic Trust Co. arrange financing for property developers, steel mills and other businesses starved for cash and shunned by China's traditional banks. The lenders at Citic and other institutions that make up China's "shadow banks" have created the closest thing China has to the culture of Wall Street. They take risks that traditional banks won't, going so far as to create investment funds for assets like top-shelf liquor and mahogany furniture. Their top executives drive luxury cars and frequent expensive clubs. Now, China's shadow banks—a mélange of trust companies, insurance firms, leasing companies, pawnbrokers and other informal lenders subject to limited oversight—are at the center of mounting concerns over whether the country's slowing economy could trigger a debt crisis.

• Explosions, Gunfire Rock Central Kabul. Gunfire and explosions rocked central Kabul, a week after the Taliban opened a negotiating office in the Gulf emirate of Qatar. A plume of dark smoke was visible close to embassies and government buildings, and an alarm warning coalition and diplomatic personnel to take cover was audible in the city's diplomatic quarter.

• Underwater Drones Are Multiplying Fast. Robots Are Invading the Sea for All Kinds of Inspections—With an Eye on Prey. The next army of unmanned drones are scurrying beneath the ocean's surface. Hundreds of small camera-equipped robots developed by a range of companies are sending video and other data to laptop and tablet screens above.

• Army Plans Cuts to Combat Forces. The Army will announce Tuesday it will cut more than 10 brigade combat teams, a significant reduction in the size of its fighting forces and combat power, according to defense officials. The Army has previously announced it will reduce the size of its force from its current level of 541,000 to 480,000 by 2017 under the $487 billion of spending reductions mandated by the 2011 Budget Control Act, but hasn't detailed precisely which parts of its active-duty force it will cut. 

• Texas' Next Big Oil Rush. New Pipelines Ferrying Landlocked Crude Expected to Boost Gulf Coast Refiners. New pipelines are beginning to carry a glut of domestic crude from the middle of the country to Texas' Gulf Coast, boosting the fortunes of the area's big refineries and further fueling a decline in oil imports.

• Stephens: The Age of American Impotence. As the Edward Snowden saga illustrates, the Obama administration is running out of foreign influence.

Fox News:

• Senate advances immigration bill in key test vote. An immigration overhaul that would legalize millions of undocumented immigrants while boosting border security passed a major test in the Senate on Monday, as lawmakers voted to advance a compromise measure despite resistance from some Republicans. The Senate voted 67-27 to advance an amendment that was only submitted late last week. Critics complained that the Senate was voting on the 119-page proposal before having a chance to analyze it.

Zero Hedge:   

• Asia Crumbling; China's Worst 2 Days In Almost 4 Years, Nikkei 450 Pts Off Session Highs. (graphs)

• The Dark Side Of Soaring Rates: A Housing Market That Lost 16% Of Its Value In Under Two Months. (graph)

• Fed Shocked To Find Student Loans Used For Anything But To Learn.

• Presenting Chinese Wealth Management Product's Infinite 'Risk' Loop.

• Collapsing European Imports Crush Current Account Recovery Cravings. (graph)

• Is This The Recovery In Housing They Wanted? (graph)

Business Insider: 

• The NSA Has No Idea How Much Secret Data Edward Snowden Took, And That Has Them Very Worried.

• Market Uncertainty Is Making It Very Difficult For Borrowers To Raise Cash.

• CITI(C): We're 'Shocked' By The Surge In Negative Earnings Preannouncements. (graphs)

• The Fed's Richard Fisher: I'm Comfortable With The Rise In Treasury Yields.

Washington Post:

• The Insiders: The president plans to raise your power bill. If you accept the science of global warming, then you accept the fact that the president’s unilateral action on climate change will have absolutely no effect in terms of adjusting the global thermostat to a temperature Obama finds desirable. The rest of the developing world, anchored by India and China, are building carbon-burning factories, power plants and even whole new cities that will overwhelm any new rules the president may impose on Americans and our struggling economy.

New York Times:

• Exit From the Bond Market Is Turning Into a Stampede. Wall Street never thought it would be this bad. Over the last two months, and particularly over the last two weeks, investors have been exiting their bond investments with unexpected ferocity, moves that continued through Monday.

• Credit Warnings Give World a Peek Into China’s Secretive Banks. China’s hidden banking system is coming out of the shadows as the government seeks to rein in the excessive lending that it fears could spin out of control. The People’s Bank of China, the central bank, let the world know on Monday that it was putting the nation’s banks on notice: the loose money and the speculation it fed had to stop. It said banks had to step up risk controls and improve cash management. And they had to do it, the bank said, by avoiding a “stampede” mentality. The banks had quietly received that very message a week earlier, which set off, if not a rush for the exits, certainly widespread worry in China and financial centers around the world.

Reuters: 

• Six more U.S. municipal bond sales postponed. With yields on the U.S. municipal bond market rising, local issuers on Monday postponed another six bond sales, totaling $331 million, that were originally scheduled to price later this week. 

• Asia driving "explosion" in global arms trade-study. Asian powers are outpacing the United States to become the biggest spenders on defence by 2021 and are fuelling an "explosion" in the global arms trade, a study showed. The global arms trade jumped by 30 percent to $73.5 billion between 2008-2012 in spite of the economic downturn, driven by surging exports from China and demand from countries like India, and is set to more than double by 2020, defence and security consultancy IHS Jane's said on Tuesday.

Telegraph: 

• Italy could need EU rescue within six months, warns Mediobanca. Italy is likely to need an EU rescue within six months as the country slides into deeper economic crisis and a credit crunch spreads to large companies, a top Italian bank has warned privately. Mediobanca, Italy’s second biggest bank, said its “index of solvency risk” for Italy was already flashing warning signs as the worldwide bond rout continued into a second week, pushing up borrowing costs. “Time is running out fast,” said Mediobanca’s top analyst, Antonio Guglielmi, in a confidential client note. “The Italian macro situation has not improved over the last quarter, rather the contrary. Some 160 large corporates in Italy are now in special crisis administration.” The report warned that Italy will “inevitably end up in an EU bail-out request” over the next six months, unless it can count on low borrowing costs and a broader recovery. Emphasising the gravity of the situation, it compared the crisis with when the country was blown out of the Exchange Rate Mechanism in 1992 despite drastic austerity measures.

Sueddeutsche Zeitung:

• Weidmann Calls for Strict Balance-Sheet Tests for Banks, Sueddeutsche Zeitung. Bundesbank President Jens Weidmann says balance sheets of European banks need to be cleaned up, citing an interview. Says "thorough and rigorous review essential to avoid further unpleasant surprises". Says failure to implement might damage credibility of banking union. European Central Bank plans "quality" test for 130-150 banks that will be under the bank's supervision in future. Says need to maintain option to shut banks down. Says if there's common supervision, there should also be joint restructuring and settlement. Says private investors should be the first to provide financing and only when that isn't possible should governments decide if public funding will be used. Says only when banks are adequately capitalized and have sustainable business models will they be able to carry risk and provide credit.

China Daily:

• China Prepared for Pain to Ensure Reform: Editorial. Drop in benchmark Shanghai Composite Index yesterday shows authorities are preparing to continue painful and necessary reforms to keep the economy growing in a more sustainable manner, the editorial said. Exposing problems for "early treatment" is better than "tinkering" that delays a crisis. The direction of reform cannot be clearer, the editorial said.

• China Should Target EU Trade, Investment in Solar Dispute. China should launch retaliatory trade investigations to "hit back" at the EU after the region imposed tariffs on Chinese solar panels, Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation affiliated to the Ministry of Commerce, writes in a commentary. The government could also curb investments and trade orders to the EU as the region is trapped in a a debt crisis and depends on Chinese investment and trade, Mei wrote. China could also take action specifically against France, Italy, Lithuania and Portugal, which supported the tariffs, he said.

• China Shouldn't  Ease Liquidity to Rescue Market. China's stock market would be hurt if central bank eased liquidity or regulators continue a suspension of IPOs., according to a commentary published by Gao Yuncai.

Shenzhen Daily:

• Hedge fund manager expects market crash. FORMER chess grandmaster-turned hedge fund manager Patrick Wolff is betting on a stock market crash in China, where he says bad debts have spiraled to dangerous levels. Speaking to reporters on the sidelines of the GAIM conference in Monaco last week, Wolff said investors were too focused on trying to work out when easy money policies will taper off in the United States and ignoring a looming correction in China. “People are talking way too much about the Federal Reserve and not enough about China,” he said. “We’ve been saying that the United States is the safest place to invest, while China is a crash waiting to happen.” He is short on Chinese stocks and generally long on U.S. equities.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -3.0% to -.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 167.50 +7.5 basis points.

• Asia Pacific Sovereign CDS Index 140.75 +14.5 basis points.

• FTSE-100 futures -.22%.

• S&P 500 futures -.31%.

• NASDAQ 100 futures -.28%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BKS)/-.99

• (CCL)/.07

• (LEN)/.34

• (WAG)/.90

• (AVAV)/-.07

• (APOG)/.14

• (APOL)/.85

• (SWHC)/.43 

Economic Releases
8:30 am EST

• Durable Goods Orders for May are estimated to rise +3.0% verus a +3.3% gain in April.

• Durables Ex Transports for May are estimated unch. versus a +1.3% gain in April.

• Cap Goods Orders Non-defense Ex Air for May are estimated to rise +.5% versus a +1.2% gain in April.

9:00 am EST

• S&P/CS 20 City MoM% SA for April is estimated to rise +1.2% versus a +1.12% gain in March.

• The House Price Index for April is estimated to rise +1.1% versus a +1.3% gain in March.

10:00 am EST

• The Richmond Fed Manufacturing Index for June is estimated to rise to 2.0 versus -2.0 in May.

• Consumer Confidence for June is estimated to fall to 75.1 versus 76.2 in May. 

• New Home Sales for May are estimated to rise to 460K versus 454K in April.

Upcoming Splits

• (SIX) 2-for-1

• (CRVL) 2-for-1

Other Potential Market Movers

• The Italian 10Y auction, Italian Retail Sales reports, 2Y T-Note auction, weekly retail sales reports, (CSCO) Investor Day and the Global Hunter Energy Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Falling into Final Hour on Rising Global Growth Fears, Rising Asian/Eurozone Debt Angst, Technical Selling, Commodity/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 19.61 +3.76%
• Euro/Yen Carry Return Index 133.65 -.17%
• Emerging Markets Currency Volatility(VXY) 11.79 +.68%
• S&P 500 Implied Correlation 60.11 +4.20%

• ISE Sentiment Index 70.0 -10.26%

• Total Put/Call .99 -14.66%

• NYSE Arms 1.19 +29.39% 

Credit Investor Angst:

• North American Investment Grade CDS Index 96.99 +3.18%

• European Financial Sector CDS Index 190.19 +5.39%

• Western Europe Sovereign Debt CDS Index 95.50 +.53%

• Emerging Market CDS Index 369.30 -2.1%

• 2-Year Swap Spread 19.5 -.5 bp

• TED Spread 23.5 -.25 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -12.75 +.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .04% unch.

• Yield Curve 217.0 +1 bp

• China Import Iron Ore Spot $116.60/Metric Tonne -1.69%

• Citi US Economic Surprise Index -8.10 +3.9 points
• Citi Emerging Markets Economic Surprise Index -38.60 +5.1 points 

• 10-Year TIPS Spread 1.92 -2 bps

Overseas Futures:

• Nikkei Futures: Indicating +160 open in Japan

• DAX Futures: Indicating +46 open in Germany

Portfolio: 

• Higher: On gains in my index hedges and emerging markets shorts
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg: 

• Snowden Fleeing Damaging to U.S.-China Relations, Carney Says. Hong Kong’s decision to let fugitive Edward Snowden leave for Moscow “unquestionably” damages U.S. relations with China, President Barack Obama’s spokesman said. The U.S. government has expressed its “frustration and disappointment with Hong Kong and China” for letting Snowden flee, White House press secretary Jay Carney said today. 
• Berlusconi Convicted by Milan Court in Sex-With-Minor Case. Silvio Berlusconi, the 76-year-old billionaire and former Italian prime minister, was found guilty by a Milan court of paying a minor for sex and abusing the power of his office. He was sentenced to seven years in jail. Berlusconi was also given a lifetime ban from public office, Judge Giulia Turri said in the Milan courtroom after a two-year trial. The ruling doesn’t become binding until the end of the appeals process, which could take months or years, and even if the sentence were enforced, it may involve house arrest due to his age. Turri urged prosecutors to seek perjury charges against more than 30 witnesses in the case.
• European Stocks Drop on China Concern; Erste Group Falls. European stocks fell for a fifth day, erasing their gains for the year, as Goldman Sachs Group Inc. cut China’s growth forecast amid concern banks in the world’s second-largest economy face a cash crunch. Erste Group Bank AG tumbled the most in 17 months as it planned a rights offer to repay state aid. Kazakhmys Plc plunged to a four-year low as it backed a bid to take Eurasian Natural Resources Corp. private. Kabel Deutschland Holding AG rose 1.7 percent after Vodafone Group Plc offered to buy the German cable company for 7.7 billion euros ($10.1 billion). The Stoxx Europe 600 Index declined 1.7 percent to 275.66 at the close in London. The equity benchmark has entered a so-called correction, having slumped 11 percent since May 22.
• Company Credit Swaps in U.S. Rise to Highest Level Since Dec. 5. A gauge of U.S. corporate credit risk rose for a fourth day to a more than six-month high as Chinese equities entered a bear market on concern that a cash crunch will injure the economy. The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, increased 5.7 basis points to a mid-price of 99.7 basis points at 8:28 a.m. in New York, according to prices compiled by Bloomberg. Earlier the index reached 99.8 basis points, the highest intraday level since Dec. 5.
• Copper Declines as Inventories Advance to 10-Year High. Copper fell to the lowest in almost three years in New York on concern that slowing growth in China will curb demand as inventories reach a 10-year high. Aluminum extended the longest slump since at least 1987. China’s central bank said there’s a reasonable amount of liquidity in the financial system and urged banks to control risks from credit expansion, signaling no relief from a cash squeeze. Copper stockpiles monitored by the London Metal Exchange climbed to the highest since June 2003 and Freeport-McMoran Copper & Gold Inc. (FCX)’s Grasberg mine in Indonesia is resuming output after a tunnel collapsed on May 14. “China’s credit crunch is exacerbating a slowdown there that was already going on,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “That’s going to slow world demand for copper. And inventories are growing.” Copper futures for September delivery fell 2.3 percent to settle at $3.0285 a pound at 1:12 p.m. on the Comex in New York after touching $2.9935, the lowest for a most-active contract since July 20, 2010. Trading volume in New York was 38 percent higher than the average for the past 100 days at this time, according to data compiled by Bloomberg.
• Kocherlakota Says Fed Policy Guidance Is ‘Insufficient’. Federal Reserve Bank of Minneapolis President Narayana Kocherlakota, who doesn’t vote on monetary policy this year, said the central bank needs to set clearer guideposts for the outlook for record stimulus and commit to press on with monthly bond purchases at least until unemployment falls below 7 percent. “The committee’s communications have provided insufficient detail about how its policy strategy will play out when the recovery is more advanced,” Kocherlakota said in a statement today released by the Minneapolis Fed.
• Fed’s Fisher Says He Backs Tapering QE With Economic Improvement. Federal Reserve Bank of Dallas President Richard Fisher, who doesn’t vote on monetary policy this year, said he favors scaling back the Fed’s monthly bond-buying if the economy makes the kind of progress officials are currently expecting. “I agree fully with the chairman that we should dial back on the stimulus” should “we achieve what the 19 of us forecast,” Fisher said today in a speech in London. The central bank is currently purchasing $85 billion in bonds every month. 
• U.S. FTC Said to Open Probe of Oil Price-Fixing After EU. The U.S. Federal Trade Commission opened a formal investigation into how prices of crude oil and petroleum-derived products are set, mirroring a European Union inquiry, two people familiar with the matter said. The investigation, now in a preliminary stage, will probably become a broad probe similar to the multi-jurisdictional inquiry into bank manipulation of the London interbank offered rate, or Libor, the people said. FTC investigators are reviewing the progress their European counterparts have made, said the people, who asked not to be named because the matter is confidential.
• Options on Debt Derivatives Nearing $100 Billion: Credit Markets. The market for options on credit derivatives indexes has surged more than 40 percent in the past month to $98.8 billion as investors search farther afield for cheap hedges protecting against a sell-off in the bond markets. The contracts, which give investors the right but not the obligation to buy or sell indexes of credit-default swaps at a certain price, have doubled from $48.7 billion a year ago, Depository Trust & Clearing Corp. data show. That compares with a 17 percent drop in the amount covered by swaps benchmarks on U.S. and European investment-grade debt and a 4 percent decline for all credit derivative products in the year through June 14.

MarketWatch:

• Emerging-market rout sparks fears of full-fledged crisis. (graph)
• Gold, copper drop as China worries mount. Copper falls to lowest level in nearly 3 years. Gold futures were under renewed pressure Monday, while copper dropped to its lowest level in nearly three years after tightening credit conditions in China triggered a global equity selloff on fears about Chinese economic growth.

CNBC:

• Mark Mobius: China's Problems as Big as US Subprime. While China's housing market problems are similar in scale to those faced during the U.S. subprime mortgage bubble and its banks are rife with bad loans, it won't lead to another Lehman-style crash, Franklin Templeton's Mark Mobius told CNBC on Monday. Mobius manages some $53 billion in emerging market funds and has more money invested in China than in any other market.
• Earnings Season Already Looks Like a Train Wreck. Employers Test Plans That Cap Health Costs. Hoping to cut medical costs, employers are experimenting with a new way to pay for health care, telling workers that their company health plan will pay only a fixed amount for a given test or procedure, like a CT scan or knee replacement. Employees who choose a doctor or hospital that charges more are responsible for paying the additional amount themselves.

Zero Hedge:

• China Crashing: Shanghai Composite Tumbles Most Since 2009. (graphs)
• Bank Of China Declares Moratorium On Transfers, Online Banking; Counters Inoperable.
• European Stocks Plunge To Seven-Month Lows; Banks In Bear Market. (graphs)
• Market's 'Hall Pass' Is Gone: "Bad News Is No Longer Good News".
• Where Are We Now? - A World View.

Business Insider: 

• Every Student And Parent Should See These Charts On Earnings By Major.
• Glenn Hubbard Explains The Doomsday Scenario That America Will See In 20 Years If There's No Change In Spending.
• Dallas Fed Manufacturing Survey Surges.
• The Brazilian Bond Market Massacre In One Huge Slide.

Marc to Market: 

• Emerging Market Preview in the Week Ahead.

Reuters: 

• TREASURIES-U.S. 30-year bond prices turn positive.
• Dalio's Bridgewater big loser in market sell-off -sources. A $70 billion portfolio managed by hedge fund titan Ray Dalio's Bridgewater Associates and widely held by many pension funds is emerging as a big loser in the recent sell-off by markets, according to two people with knowledge of the numbers. The Bridgewater All Weather Fund is down roughly 6 percent through this month after losing 5 percent in May, the people said. For the year, the All Weather fund is down 8 percent. 
• Hospital chain Tenet(THC) to buy Vanguard Health(VHS) for $1.73 bln.
• EMERGING MARKETS-Latam stocks drop in emerging markets sell-off.

Telegraph: 

• Green rules will leave Europe importing even dirtier fuel from elsewhere, Essar Energy warns. Draconian green regulations risk putting European refineries out of business, leaving the continent importing more fuels from dirtier plants elsewhere in the world, Essar Energy has warned.

Handelsblatt:

• CDU's Willsch Recommends Greek Euro Exit. Euro exit is Greece's only chance to recover via devaluation of a new currency and structural reforms, citing Klaus-Peter Willsch, a lawmaker from German Chancellor Angela Merkel's Christian Democratic Union party and budget-committee member, as saying. After successful reforms Greece could reapply for euro membership, Willsch said. Willsch skeptical Greek Prime Minister Antonis Samaras' government can reach EU, IMF targets after failed privatization of natural gas company Depa.

Xinhua:

• Shanghai will continue to implement the nation's property control policies, citing Pang Yuan, vice director of the Shanghai housing bureau.