Today's Headlines

Bloomberg:

• Rebels Kill 14 Downing Ukraine Chopper as Russia Sees War. Pro-Russian rebels downed a military helicopter in eastern Ukraine, killing 13 troops and a general, as an adviser to President Vladimir Putin accused the U.S. of pushing the world toward war through proxies in Kiev. Insurgents shot down an Mi-8 transport chopper with a shoulder-fired missile amid heavy fighting in Slovyansk, 100 miles (160 kilometers) from the Russian border, Speaker Oleksandr Turchynov told parliament today. They also attacked a military base near Luhansk, according to the National Guard. Russia demanded Ukraine halt its “fratricidal war” and withdraw troops from the mainly Russian-speaking regions of the east after separatists suffered the heaviest casualties of their campaign. Western countries should use their influence to stop Ukraine from “sliding into a national catastrophe,” the Foreign Ministry in Moscow said on its website.
• Russia Sanctions Threat Seen Abating Amid Recession Risk. Russia is less likely to face further sanctions from the U.S. and the European Union as the government is sending conciliatory signals toward Ukraine, a Bloomberg survey of economists showed. The U.S. will refrain from escalating punitive measures, according to 66 percent of respondents in a survey of 32 economists, compared with 28 percent last month. The EU will hold off on sanctions according to 84 percent, up from 78 percent in April. The probability of the Russian economy slipping into recession in the next 12 months remained at 50 percent, according to the median forecast in a separate survey. 
• China Threatens Further Action Against U.S. Over Hacking Dispute. China said it will take further action against the U.S. for prosecuting five of its military officers for alleged hacking, saying it has evidence its companies have also been hacked. Online attacks from a “specific country” have targeted Chinese companies, its military and important websites, Ministry of National Defense spokesman Geng Yansheng said. Geng didn’t specify the country in remarks posted on the ministry’s website today in response to a question about the indictment. 
• Bond Surge Worldwide Drives Index Yield to One-Year Low. A worldwide bond-market surge pushed yields to the lowest levels in a year on growing evidence central banks can keep stimulating economic growth without igniting inflation. Treasury 10-year note yields fell to the least since June. A rally yesterday drove the yield on the Bloomberg Global Developed Sovereign Bond Index to 1.28 percent, the lowest since May 2013. Australia’s (GACGB10) 10-year yield dropped to an 11-month low, Japan’s slid to the least in 12 months, while European bond yields were close to the lowest since the formation of the region’s shared currency. The U.S. sold $29 billion of seven-year notes at the lowest yield since October.
• Copper Drops From 11-Week High AMid Demand Concerns. Copper fell from an 11-week high in London on signs of slowing economic growth in China and the U.S., the biggest users of the metal. U.S. gross domestic product fell at a 1 percent annualized rate in the first quarter, a bigger drop than economists surveyed by Bloomberg projected, government figures showed today. A purchasing managers index due later this week may show little acceleration this month in Chinese manufacturing after the gauge grew less than estimated in April. Copper has lost 6.4 percent this year amid signs of slowing economies.
• Obama Seeks Climate Legacy as Coal-State Democrats Cringe. Obama now is set to release new limits on greenhouse gas emissions by power plants as early as next week. That comes atop the unveiling of a National Climate Assessment in May and executive actions including promoting renewable fuels and building better defenses against extreme weather. Liberated from re-election politics, he’s freer to speak about the challenges of a warming planet and is using his bully pulpit to create urgency on an issue that most Americans rank as a low priority, the aides said. The expansive action is alarming some in the business community, who say the administration’s policies will hurt the economy. “This administration is setting up the next energy crisis in this country,” said Laura Sheehan, a spokeswoman for the American Coalition for Clean Coal Electricity in Washington. “They’re not looking at the long-term consequences.” Obama also faces push-back from some within his own party, who warn that tighter regulations could hamper Democratic candidates in areas where coal is a major source of jobs. Democrats in Kentucky and West Virginia already are distancing themselves from the president’s energy policies, highlighting their opposition to a “war on coal” on the campaign trail. 
• Consumer Comfort in U.S. Falls to Lowest Level Since November. Consumer confidence declined last week to the lowest level since November as Americans’ views of their finances and the buying climate weakened. The Bloomberg Consumer Comfort Index fell to 33.3 in the period ended May 25 from 34.1 the prior week. A measure of personal finances retreated for the third time in four weeks, and a gauge of whether this is a good time to buy goods and services dropped to the lowest point since mid-February.
• Credit Trader’s Shift to Rates Shows Where Anxieties Lie. Rate derivatives have become more popular than ever for wagering on whether borrowing costs will rise or fall as the Federal Reserve scales back its unprecedented stimulus. The amount of over-the-counter interest-rate swaps has swelled 30 percent since the end of 2009, to a record notional $584.4 trillion as of December, according to a May 23 CME Group Inc. (CME) report. At the same time, the volume of privately negotiated credit-default swaps has plunged to a notional $21 trillion, 64 percent below the peak of $58.2 trillion in December 2007.

Wall Street Journal:

• DOJ Opened At Least 10 Probes into Bank Processing Activities. 'Operation Choke Point' Disclosed in Government Memo. The U.S. Department of Justice has opened at least 10 civil and criminal investigations into whether banks and payment processing firms helped enable fraudulent activity, according to an internal Justice Department memo viewed by The Wall Street Journal. More than 850 pages of internal documents on the DOJ's probe of alleged fraud in the financial industry were obtained by the House Oversight and Government Reform Committee. Ms. Frimpong, in her memo, wrote that the government had the opened civil investigations into 10 banks and payment processors and was in settlement talks with three of them.
• Doctors' War Stories From VA Hospitals. Administrators limited operating time so that work stopped by 3 p.m. With the recent revelations about the disgraceful treatment of patients by the Veterans Affairs hospitals, the public is discovering what the majority of doctors in this country have long known: The VA health-care system is a disaster.
• Justice Dept. Seeks More Than $10 Billion Penalty From BNP Paribas. French Bank Faces Criminal Probe of Alleged Sanctions Violations. 
• Tyson(TSN) Enters Bidding for Hillshire Brands With $6.1 Billion Offer. Proposal Tops Offer Made by JBS's Pilgrim's Pride, Setting Up Meatpacker Slugfest.

MarketWatch.com:

• Hedge fund assets to hit $5.8 trillion by 2018: Citi survey. The hedge fund industry will double its assets in the next four years to nearly $6 trillion by diversifying products and giving retail investors more access, according to a new survey. Traditional hedge fund clients are high-net-worth individuals, but more and more retail investors will have access to the asset class, according to the latest Citi Investor Services Survey.

Fox News: 

• Obama under bipartisan pressure to oust Shinseki on heels of IG report. President Obama is coming under heavy pressure from both sides of the aisle following a scathing inspector general report to tackle the problems at the Department of Veterans Affairs head-on -- first, by relieving VA Secretary Eric Shinseki of his command. More than a half-dozen Democratic senators are now calling for Shinseki's resignation, since the Office of Inspector General released an interim report on Wednesday finding "systemic" problems with clinics lying about patient wait times.

CNBC:

• Politicians fight back as hedge funders ramp up election spending. (video)
• Fed's Lacker: Expect a positive GDP reversal in the second quarter. (video) Richmond Fed Reserve President Jeffrey Lacker has long called for a narrower and more restrained role for the central bank, arguing that it should shift back to a more traditional and less interventionist role.
• Ford(F) recalls 915K Ford Escape, Mercury Mariner cars in North America.

ZeroHedge:

• Meet Directive 3025.18 Granting Obama Authority To Use Military Force Against Civilians.
• Over A Thousand Soldiers Killed As Ukraine Fighting Escalates, Russian Media Reports.
• 10Y Treasury Yield Hits 2.40%. (graph)
• Someone Is Dead Wrong About The Economy.
• Texas VA Run Like A "Crime Syndicate" Claims Whistleblower.
• "Pent-Up" Pending Home Sales Demand Missing; Down 9.4% YoY. (graph)
• US Economy Shrank By 1% In The First Quarter: First Contraction Since 2011. (graph)
• Initial Claims Drop Near Cycle Low "As Good As It Gets" Levels.

ValueWalk:

• 500 Largest Hedge Fund Managers Control 90% Of AUM. Preqin Research highlights the 505 hedge fund managers with more than $1bn in AUM currently manage $2.39tn of the industry’s $2.66tn total assets, but account for just 11% of active firms.
• Derivatives Worldwide Hit 710 Trillion, According To BIS Study. The Bank for International. Settlements (BIS) just published a statistical study on the amount of derivatives worldwide at the end of 2013, and they reach the astronomical amount of $710 Trillions ($710,000,000,000,000). For comparison purposes, the United States GDP in 2013 amounts to $16 Billion, or 44 times less. And this mass of derivatives beats by 20% the preceding record, dating just before the 2008 crisis… We hear a lot about bubbles these days, in the stock market, the bond market or in the commodities market, but this one is without a doubt the greatest one.

Reuters: 

• Russia tensions to cut emerging market flows -global bank group. Private capital flows to emerging markets are likely to drop to their lowest level in five years in 2014 as money going to Russia dries up due to Moscow's conflict with Ukraine, a global financial industry group forecast on Thursday.

Folha de S.Paulo:

• Brazil Govt Sees Possibility of 2014 GDP Growth Below 2%. Economic growth has become main concern for govt, citing President Dilma Rousseff's aides it didn't identify. Govt sees possibility of trade deficit this year. Investments may be below 2013 level. Govt sees no room for fiscal expansion to stimulate economy; inflation still high.