Monday Watch

Weekend Headlines 
Bloomberg:

• Merkel, Hollande Step up Pressure in Ukraine Dispute. German Chancellor Angela Merkel and French President Francois Hollande, in a telephone call lasting more than two hours, stepped up pressure on Russia and Ukraine to resolve their territorial dispute. Ukraine accused pro-Russian rebels of breaking a cease-fire that is due to end today, the same day Russian President Vladimir Putin faces the threat of deeper European Union sanctions. Merkel and Hollande, in yesterday’s call with Putin and Ukrainian President Petro Poroshenko, stressed the importance of “the extension of the cease-fire and the implementation of the peace plan presented by the Ukraine authorities,” according a statement from the French president’s office. 

• Slowing China Economy Dims Profit Outlook to 2012 Low. The most-actively traded Chinese companies in the U.S. are on pace to report the smallest profits in two years as growth in the world’s second-largest economy decelerates to the slowest since 1990. Analysts covering stocks listed on the Bloomberg China-US Equity Index (HSCEI) estimate that on average they will post earnings of $5.64 per share this year, which would be the lowest profits reported since 2012, data compiled by Bloomberg show. They’ve cut revenue forecasts by 7.9 percent in the past 11 weeks. 

• Kuroda Optimism Questioned as Price Outlook Drops. Bank of Japan Governor Haruhiko Kuroda says inflation will get back on track toward his target after a slowdown in the summer. Bond traders are skeptical. The market for inflation-linked debt shows expectations for annual consumer-price increases of 1.25 percent over 10 years, the lowest outlook since April 1 and compared with the BOJ’s goal of 2 percent, according to the so-called break-even rate. The gauge has retreated from as high as 1.39 percent on June 3 as data showed slumping household spending, falling wages and slowing exports. The equivalent U.S. rate was 2.25 percent.

• BIS Damps $2 Trillion Emerging Market Company Debt Spree. More than $2 trillion of foreign borrowing by emerging-market companies since 2008 is leaving them vulnerable to a sudden drop in funding at the first sign of trouble, according to the Bank for International Settlements. Bond investors willing to lend generously when conditions are good can pull out in a crisis or when central banks tighten monetary policy, analysts led by Claudio Borio, head of the monetary and economic department, wrote in the BIS annual report. Emerging-market companies that lose access to external debt markets may then be forced to withdraw bank deposits, depriving domestic lenders of funding as well, they said. 

• ECB Rates Allow Zombie Loans to Stymie Credit, BIS Says. Loose monetary policy makes it easy for euro-area banks to keep bad debt on their books, potentially delaying the flushing out of sour loans, the Bank for International Settlements said in its annual report. The European Central Bank’s record low interest rates and ample liquidity have boosted banks’ lending margins, allowing them to gloss over losses in their business, the Basel, Switzerland-based BIS said in the report, released today. That’s what makes it so crucial to find other means to fix banks’ balance sheets, such as the ECB’s asset-quality review, it said.

• Central Bankers Who Bemoan Low Volatility Share Blame, BIS Says. Central bank policy makers have expressed concern this year that low market volatility is masking future risks. In fact, they’re helping cause the issue they bemoan, the Bank for International Settlements said. Record-low interest rates and unconventional monetary easing by the Federal Reserve, European Central Bank and the Bank of Japan reduced price swings across markets, the BIS wrote in its annual report published today. That’s prompted investors to take greater risks to maintain returns, even amid an uncertain global recovery, according to the BIS, which that acts as a central bank for the world’s monetary authorities. 

• Home-Bias Risk Identified by BIS in Bond Regulations. National supervisors may be encouraging domestic banks to buy their own governments’ bonds because the regulators are able to specify how risky the assets are, the Bank for International Settlements said. Financial institutions in Ireland, Portugal and Spain may be benefiting from a home bias that lowers the amount of capital they need to put aside to compensate for risks tied to the assets they hold, the BIS said in its annual report today. The trend is less evident in Austria, Britain and France, it said.

• Central Banks Face Bumpy Road to Normalization, BIS Says. Central banks shouldn’t procrastinate and must be ready for a rough ride as they exit emergency policy measures, the Bank for International Settlements said. “It will be difficult to ensure a smooth normalization,” the BIS said in its annual report released today. “The prospects for a bumpy exit together with other factors suggest that the predominant risk is that central banks will find themselves behind the curve, exiting too late or too slowly.”

• Emerging Stocks Add to Quarter’s Gain With Won; Oil Falls. Emerging-market stocks rose, with a benchmark gauge heading to its biggest quarterly advance since September 2012, while the yen gained and South Korea’s won hit an almost six-year high. Oil fell on speculation violence in Iraq won’t curb output from OPEC’s second-biggest producer. The MSCI Emerging Markets Index added 0.4 percent by 12:13 p.m. in Tokyo, heading for a 5.6 percent gain since the end of March.

• Fear Thaws Out for Investors as Online Brokers Defy Funk. With U.S. stocks stuck in the sleepiest funk since the dawn of the Internet, one group is waking up: online and discount brokers.

Wall Street Journal: 

• Militants Leverage Iraq Gains in Syria. Flush with Iraqi Successes, ISIS Fights Other Islamists in Syria.

• In Ukraine, Frustration Grows With Kiev's Peace Efforts. Separatists Continue Attacks on Government Troops As European Leaders Urge Cease-Fire Extension.

• A Recovery Stymied by Redistribution. Public policy intended to make layoffs less painful actually made layoffs cheaper and more common. 

MarketWatch.com:

• Hong Kong’s China debt trap. Opinion: Are the city’s banks getting too cozy with mainland Chinese finance.

Fox News:

• Gunmen torch churches, kill dozens in Nigeria. Suspected Islamic extremists sprayed gunfire at worshippers and torched four churches Sunday in a village just miles from the town where more than 200 schoolgirls were kidnapped, witnesses said. At least 30 bodies have been recovered but more are turning up in the bushes, where people tried to escape from Kwada village, said a member of a vigilante group that has had some successes in repelling attacks.

Zero Hedge:

• 5 Things To Ponder: The More Things Change.

• What The CEOs Are Really Saying In Q2: "The Recovery Remains Fragile".

• How The Fed Distorts Everything.

• The Keynesian End Game Is Near: No Escape Velocity This Year, Either.

• China's Replica Of Manhattan Results In Yet Another Ghost City.

• Martin Armstrong Warns Civil Unrest Is Rising Everywhere: "This Won't End Pretty".

• Shinzo Abe And The Three Magic Arrows.

• "The Battle For Baghdad" - A Backgrounder On ISIS' Grand Plan.

• Crushing The Q2 "Recovery" Dream In 1 Simple Chart. (graph)

• 13 Ways Of Looking At Record Low Volatility. (graph)

• The Truth About First Quarter S&P 500 Earnings. (graph)

• Q2 Economic "Hope" Misses The Point. (graph)

• Iraqi Army Retreats From Saddam's Hometown As Assault On ISIS Falters.

• Europe's Fragile Recovery Is Stalling As Germany Sputters.

• Let's Take A Look At The Latest NYSE Margin Debt Data In Historical Context. (graph)

• ISIS Declares A Caliphate; Crucifies 9 Syrian Rebels For Being "Too Moderate". (pics)

• USDJPY Nears 2014 Lows As Goldman Warns Economic "Downside Risks Are High".

• Goldman(GS) Warns Political Risks Are Set To Surge. (pics)

• BofA(BAC) Fears The End Of 'The Japan Trade'.

• Axel Merk: The Fed's Next Move? "If You're Not Concerned, You're Not Paying Attention".

Business Insider:

• A Mexican Military Helicopter Entered The US And Fired On Two Border Patrol Agents.

• China's Crackdown On Corruption May Now Be Weighing On Growth.

• The Kurds May Want To Rethink Independence — Unless They Want To Anger Iran.

• Even The Editor Of Facebook's Mood Study Thought It Was Creepy.

• Privacy Advocates Are Freaking Out About A High-Tech Surveillance Program In A Major US City.

• It's 'Flee Or Be Killed' In Tikrit, Iraq Right Now.

• The 'Islamic Caliphate' Is Now A Reality.

• North Korea Has Detained Two US Citizens And Wants To Put Them On Trial For Crimes Against The State.

• The Sectarian Genie Is Out Of The Bottle From Syria to Iraq.

Wall Street All-Stars:

• Indicator Update: Fireworks Ahead?

NY Times:

• In Home Loans, Subprime Fades as a Dirty Word.

Reuters:

• U.S. government to unveil record fine for France's BNP -sources. The U.S. Justice Department is expected to announce on Monday a settlement with BNP Paribas involving a record fine of nearly $9 billion over alleged U.S. sanctions violations by France's biggest bank, sources familiar with the matter said.

Financial Times:

• Hedge fund correlation risk alarms investors. The industry’s correlation with equity markets rose sharply in the two years leading up to the financial crisis.

Telegraph:

• Standard of living costs for families rise five times more than earnings since before recession, figures show. A couple with two children would now need just under £40,600 between them to afford a decent lifestyle, study finds.

Weekend Recommendations

Barron's:

• Bullish commentary on (NXST), (ADBE), (NTAP), (BAC), (IP), (CHS), (VLO) and (SBGI).

• Bearish commentary on (RMD).

Night Trading

• Asian indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 104.0 +2.75 basis points.

• Asia Pacific Sovereign CDS Index 73.25 -.5 basis point.

• FTSE-100 futures +.10%.

• S&P 500 futures +.05%.

• NASDAQ 100 futures +.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
9:00 am EST

• The ISM Milwaukee for June is estimated to fall to 60.0 versus 63.49 in May.

9:45 am EST

• The Chicago Purchasing Manager for June is estimated to fall to 63.0 versus 65.5 in May.

10:00 am EST

• Pending Home Sales for May are estimated to rise +1.2% versus a +.4% gain in April.

10:30 am EST

• The Dallas Fed Manufacturing Activity Index for June is estimated to rise to 10.0 versus 8.0 in May.

Upcoming Splits

• (TMK) 3-for-2

Other Potential Market Movers

• The Fed's Williams speaking, China HSBC China Manufacturing PMI, Eurozone CPI and the Argentina coupon payment could also impact trading today.

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

Weekly Outlook

Week Ahead by Bloomberg. 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as Iraq turmoil/Ukraine-Russia tensions, global growth fears and emerging markets debt angst offset quarter-end window-dressing, lower energy prices and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

• S&P 500 1,960.96 -.10%*

 The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,960.96 -.10%

• DJIA 16,851.84 -.56%

• NASDAQ 4,397.93 +.68%

• Russell 2000 1,189.50 +.09%

• S&P 500 High Beta 33.22 +.42%

• Wilshire 5000 20,558.10 -.08%

• Russell 1000 Growth 910.50 +.28%

• Russell 1000 Value 992.94 -.45%

• S&P 500 Consumer Staples 459.49 -1.36%

• Morgan Stanley Cyclical 1,593.82 -.09%

• Morgan Stanley Technology 957.57 +.29%

• Transports 8,175.52 -.36%

• Utilities 571.71 +.93%

• Bloomberg European Bank/Financial Services 106.52 -3.6%

• MSCI Emerging Markets 43.18 -.50%

• HFRX Equity Hedge 1,174.77 -.02%
• HFRX Equity Market Neutral 961.52 -.15%

Sentiment/Internals

• NYSE Cumulative A/D Line 228,353 +.39%

• Bloomberg New Highs-Lows Index 159 -569

• Bloomberg Crude Oil % Bulls 39.39 -21.22%

• CFTC Oil Net Speculative Position 458,969 +.40%

• CFTC Oil Total Open Interest 1,720,856 -.05%

• Total Put/Call .83 +7.79%

• OEX Put/Call 3.50 +253.54%

• ISE Sentiment 141.0 +63.95%

• NYSE Arms 1.48 +40.95%

• Volatility(VIX) 11.26 +3.78%

• S&P 500 Implied Correlation 49.83 +2.98%

• G7 Currency Volatility (VXY) 5.38 -1.10%

• Emerging Markets Currency Volatility (EM-VXY) 5.86 -1.84%

• Smart Money Flow Index 11,436.68 unch.

• ICI Money Mkt Mutual Fund Assets $2.556 Trillion +.20%
• ICI US Equity Weekly Net New Cash Flow -$2.193 Billion

• AAII % Bulls 37.2 +5.8%
• AAII % Bears 21.1 -12.6%

Futures Spot Prices

• CRB Index 310.82 -.67%

• Crude Oil 105.74 -1.45%

• Reformulated Gasoline 309.88 -.98%

• Natural Gas 4.41 -3.18%

• Heating Oil 299.76 -1.80%

• Gold 1,320.0 +.39%

• Bloomberg Base Metals Index 197.01 +1.71%

• Copper 314.90 +1.04%

• US No. 1 Heavy Melt Scrap Steel 357.0 USD/Ton unch.

• China Iron Ore Spot 94.90 USD/Ton +3.04%

• Lumber 337.50 +2.58%

• UBS-Bloomberg Agriculture 1,472.18 -1.0%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 4.4% -10.0 basis points

• Philly Fed ADS Real-Time Business Conditions Index .1242 -4.4%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 124.94 +.10%

• Citi US Economic Surprise Index -23.70 -13.5 points

• Citi Emerging Markets Economic Surprise Index -6.10 +2.2 points

• Fed Fund Futures imply 44.0% chance of no change, 56.0% chance of 25 basis point cut on 7/30

• US Dollar Index 80.04 -.36%

• Euro/Yen Carry Return Index 144.54 -.26%

• Yield Curve 207.0 -8.0 basis points

• 10-Year US Treasury Yield 2.53% -8.0 basis points

• Federal Reserve's Balance Sheet $4.326 Trillion unch.

• U.S. Sovereign Debt Credit Default Swap 16.97 -2.83%

• Illinois Municipal Debt Credit Default Swap 160.0 +3.23%

• Western Europe Sovereign Debt Credit Default Swap Index 28.67 -1.78%

• Asia Pacific Sovereign Debt Credit Default Swap Index 73.35 -1.60%
  

• Emerging Markets Sovereign Debt CDS Index 188.44 -3.32%
  

• Israel Sovereign Debt Credit Default Swap 77.23 +2.97%
• Iraq Sovereign Debt Credit Default Swap 329.65 +.90%

• Russia Sovereign Debt Credit Default Swap 173.99 -8.11%

• China Blended Corporate Spread Index 312.94 +.54%

• 10-Year TIPS Spread 2.26% -1.0 basis points

• TED Spread 21.50 +1.25 basis points

• 2-Year Swap Spread 12.75 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -9.75 -1.0 basis point

• N. America Investment Grade Credit Default Swap Index 57.68 +2.73%
  

• European Financial Sector Credit Default Swap Index 65.52 +10.41%
  

• Emerging Markets Credit Default Swap Index 235.79 +.03%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 83.0 -1.0 basis point

• M1 Money Supply $2.831 Trillion -.11%

• Commercial Paper Outstanding 1,054.80 +1.20%

• 4-Week Moving Average of Jobless Claims 314,250 +2,500

• Continuing Claims Unemployment Rate 2.0% +10 basis points

• Average 30-Year Mortgage Rate 4.14% -3 basis points

• Weekly Mortgage Applications 348.10 -1.0%

• Bloomberg Consumer Comfort 37.1 unch.

• Weekly Retail Sales +3.40% unch.

• Nationwide Gas $3.68/gallon +.03/gallon

• Baltic Dry Index 824.0 -8.85%

• China (Export) Containerized Freight Index 1,092.11 -.99%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 30.0 +20.0%

• Rail Freight Carloads 272,553 +.85%

Best Performing Style

• Large-Cap Growth +.3%

Worst Performing Style

• Large-Cap Value -.5%

Leading Sectors

• Oil Tankers +2.5%

• Homebuliders +2.2%

• Gaming +1.8%

• Education +1.3%

• Utilities +.9%

Lagging Sectors

• Construction -1.4% 

• Road & Rail -1.6%

• Hospitals -2.3%

• Coal -2.3%

• Tobacco -3.2%

Weekly High-Volume Stock Gainers (25)

• VRTX, AERI, SQBG, XONE, IRM, VCYT, TEG, TNC, KMX, SBGI, MEI, HBI, BKS, TWOU, PSG, APOG, GTN, CARA, IXYS, TAM, VHC, AMBA, SGNT, CONE and TREE

Weekly High-Volume Stock Losers (19)

• GIS, GMC, KND, TSCO, DRI, OC, SEAS, REGN, XXIA, EXL, BBBY, TPH, TRGP, VLO, HFC, SCS, DGI, SWHC and WWWW

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Slightly Higher into Final Hour on Quarter-End Window Dressing/Rebalancing, Buyout Speculation, Short-Covering, Oil Service/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 11.73 +.86%

• Euro/Yen Carry Return Index 144.43 -.07%

• Emerging Markets Currency Volatility(VXY) 5.87 -1.34%

• S&P 500 Implied Correlation 50.19 -.32%

• ISE Sentiment Index 133.0 +3.10%

• Total Put/Call .85 -7.61%

• NYSE Arms 1.39 +30.19% 

Credit Investor Angst:

• North American Investment Grade CDS Index 57.62 +1.46%

• European Financial Sector CDS Index 65.59 +3.87%

• Western Europe Sovereign Debt CDS Index 29.05 +2.43%

• Asia Pacific Sovereign Debt CDS Index 73.56 -.29%

• Emerging Market CDS Index 235.81 +2.04%

• China Blended Corporate Spread Index 312.94 +.98%

• 2-Year Swap Spread 12.75 +.25 basis point

• TED Spread 21.50 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -9.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .02% -1.0 basis point

• Yield Curve 207.0 +1.0 basis  point

• China Import Iron Ore Spot $94.90/Metric Tonne -.42%

• Citi US Economic Surprise Index -23.70 -.6 point

• Citi Emerging Markets Economic Surprise Index -6.10 -2.8 points

• 10-Year TIPS Spread 2.25 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +20 open in Japan

• DAX Futures: Indicating +10 open in Germany

Portfolio: 

• Slightly Higher: On gains in my retail/tech sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg: 

• Top Cleric Tells Iraq Leaders to Pick Premier by Next Week. Iraq’s top Shiite religious leader escalated pressure on politicians to agree on a new government that can prevent a fracturing of the country, as the military pressed its assault on militants who have seized major cities. Grand Ayatollah Ali al-Sistani, in remarks relayed to worshipers at Friday prayers in the holy city of Karbala, said that picking a prime minister, president and speaker when the legislature meets July 1 will lead to the “desired solution” to the crisis.

• EU Tells Russia to Stop Ukraine Rebels or Face New Costs. The European Union gave Russia three days to stop a separatist rebellion in Ukraine or face deeper sanctions as the government in Kiev prepared to extend a cease-fire originally due to expire tonight. EU leaders meeting in Brussels demanded that the separatists, whom Ukraine and its allies say are backed by Russian President Vladimir Putin’s government, return border checkpoints, release hostages and start talks to implement a peace plan drawn up by Ukrainian President Petro Poroshenko by June 30. Failure to do so will result in “further significant restrictive measures” against Russia, the leaders said in a statement. The U.S. reinforced the EU demands. White House press secretary Josh Earnest said the conditions “are very specific steps that the Russians can take by Monday” or face more economic costs.

• Ukraine to Extend Cease-Fire as President Signs EU Pact. Ukraine will extend a cease-fire in its fight against separatist rebels today after President Petro Poroshenko signed a European Union accord rejected by his predecessor that sent the country spiraling into crisis. The government in Kiev will prolong the week-long truce, which it says has been repeatedly flouted by pro-Russian separatists, by 72 hours from an original plan to end it at 10 p.m. tonight, two European government officials said. The officials asked not to be named because the discussions were private and hadn’t finished. The extension will let talks continue on the release of hostages held by separatists in Ukraine’s eastern border regions, one official said.

• China Builds Its Own Manhattan -- Except It's a Ghost Town. “Investing here won’t be better than throwing money into the water,” Zhang Zhihe, 60, said during a visit to the area last week from neighboring Hebei province to look at potential commercial-property investments. “There will be no way out -- it will be very difficult to find the next buyer.” The deserted area underscores the challenge facing China’s leaders in dealing with the fallout from a record credit-fueled investment spree while sustaining growth and jobs in the world’s second-biggest economy. A Tianjin local-government financing vehicle connected to the developments said revenue fell 68 percent in 2013 to an amount that’s less than one-third of debt due this year.

• High-Yield Bond Sales Set to Exceed $100 Billion in Europe. Sales of junk bonds in Europe are poised to surpass $100 billion for the first time as companies seek to take advantage of record low funding costs and investor demand for higher-yielding securities. Western European companies issued $99 billion of speculative-grade debt this year, up from $56 billion in the first half of 2013, according to data compiled by Bloomberg. Issuance has already surpassed last year’s record $96 billion, the data show. Investors are buying riskier securities after almost six years of suppressed benchmark interest rates eroded yields. Bond investors are shrugging off warnings from central bankers including Federal Reserve Chair Janet Yellen and Bundesbank board member Andreas Dombret that they’ve become too complacent and are making markets vulnerable to a swift reversal.

• EU Leaders Snub Cameron and Pick Juncker for Top EU Post. European Union leaders swept aside U.K. opposition and nominated Jean-Claude Juncker to the EU’s top job, further fraying ties with Britain before its planned referendum on membership of the bloc. Government heads proposed Juncker, a 59-year-old former Luxembourg prime minister, as European Commission president after he ran for the post as the candidate of Europe’s Christian Democratic parties in EU-wide elections. U.K. Prime Minister David Cameron was out-voted by his fellow leaders, the first time such a decision wasn’t taken unanimously.

• Euro-Area Economic Confidence Unexpectedly Fell in June. An index of executive and consumer sentiment fell to 102 from a revised 102.6 in May, the European Commission in Brussels said today. The median forecast in a Bloomberg News survey of 27 economists was for an increase to 103.

• German Inflation Above Forecasts Signals Euro Area Price Pickup. German inflation (GRCP2HYY) exceeded economists’ estimates this month, signaling that the annual rate of consumer-price gains in the euro area may rise from the lowest level in four years. Inflation, calculated using a harmonized European Union method, accelerated to 1 percent in June from 0.6 percent in May, the Federal Statistics Office in Wiesbaden said today. Economists predicted the rate would increase to 0.7 percent, according to the median of 23 estimates in a Bloomberg News survey. Prices rose 0.4 percent on the month, twice as much as forecast. 

• Bulgarian Lenders Under Attack, Central Bank Chief Warns. The Bulgarian central bank warned the financial industry is under organized attack by anonymous e-mails, texts and rumors, threatening the Balkan nation’s security, and urged police to find those responsible. Central bank Governor Ivan Iskrov said that First Investment Bank AD is the target of an “epidemic of rumors and libelous public statements.” He asked prosecutors, the Interior Ministry and the State Agency for National Security to investigate. The Sofix index fell as much as 2.55 percent, its fourth consecutive decline, while First Investment, the third-biggest lender by assets, tumbled 23 percent.

• Market Structure Nightmare Comes True in Barclays Dark Pools Action.

• European Stocks Are Little Changed as Mediaset Gains. European stocks were little changed, with the benchmark index posting its the biggest weekly loss since early April, as investors weighed data that showed U.S. consumer confidence rebounded in June. Mediaset (MS) SpA gained 4 percent after Exane BNP Paribas upgraded its recommendation on the stock. Ophir Energy Plc fell 5.4 percent after UBS AG downgraded the shares. Imagination Technologies Group Plc dropped 5.8 percent after Intel Corp. sold a 9.3 percent stake in the U.K. designer of chip technology for devices. The Stoxx Europe 600 Index added less than 0.1 percent to 341.97 at the close.

Fox News:

• Sources: US letting Benghazi suspects off hook, recent arrest ‘small potatoes’. According to multiple sources on the ground, including some with direct knowledge of the operations to identify and hunt the Benghazi suspects, intelligence that could have been acted upon at times has been ignored or put on hold. Further, they say, the recent capture of Ahmed Abu Khattala -- now on a ship bound for the U.S., expected to arrive this weekend -- was an easy one.

CNBC: 

• Hillary reportedly called Obama 'incompetent and feckless'. The book, "Blood Feud" by Edward Klein, claims Clinton's comments took place at a May 2013 dinner with college friends in Westchester, the New York Post reported. "When her friends asked Hillary to tell them what she thought — really thought — about the president she had served for four draining years, she lit into Obama with a passion that surprised them all," Klein wrote, according to the Post.

ZeroHedge:

• Pentagon Admits Armed Drones Flying Over Baghdad; Top Shiite Cleric Joins US Calling For Maliki Ouster.

• The Panic Behind The Propaganda: Why The Fed Wants You To Sell Your Bonds. (graph)

• What's Behind The Rise In U.S. Industrial Production? (graph)

• Why "Margin Debt" Is Meaningless In The New Shadow Banking Normal. (graph)

• Where The World's Biggest Worries Are.

• UMich Confidence Beats Modestly; Outlook Tumbles To 3-Month Lows. (graph)

• "Not Truly Well Off": Bill Clinton Was Paid $105 Million For 542 Speeches Since 2001.

Washington Post:

• Army Maj. Gen. Dana Pittard to lead U.S. operations in Iraq. The Pentagon has selected a two-star Army general who oversaw U.S. teams in Iraq in 2006 and 2007 to lead its new military mission there.

Reuters:

• Puerto Rico agency debt slumps on downgrades, restructuring law. Puerto Rico public corporation debt slumped on Friday after a new law that allows agencies to restructure their debts sparked fears of an imminent default and led to a slew of downgrades on the electricity, highway, and water authorities.

Telegraph: 

• House prices: stop meddling, Mark Carney, and bite the bullet on interest rates. Credit rationing is a bad idea – and we can only guess at the trouble it will create in the future.

The Economic Times:

• ISIL staged "mass executions" in Iraq's Tikrit: Rights group.
  
  Photograph and satellite imagery indicate that Islamic State in Iraq and the Levant (ISIL) insurgents have carried out mass executions in the northern Iraqi city of Tikrit, Human Rights Watch reported on Friday.
  
  ISIL, radical Islamists who want to re-create a mediaeval-style caliphate straddling Iraq and Syria, has stormed largely unopposed across much of northern Iraq, taking cities including Mosul and Tikrit, seizing border posts with Syria and advancing to within some 100 km (62 mil ..
  
  
  

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