- ISIL Extends Gains in Iraq, Takes Turk Diplomats Hostage. Militants from a breakaway al-Qaeda group took control of more Iraqi towns today, including the birthplace of Saddam Hussein, as the prime minister signaled he’ll deploy militias to halt their advance. After seizing Mosul, Iraq’s second city, yesterday, fighters from the Islamic State in Iraq and the Levant advanced into Tikrit, Saddam’s hometown, Noureddin Qablan, vice chairman of Nineveh provincial council, said by phone. In Mosul, ISIL took dozens of people hostage at the Turkish consulate.
- Iraq Bonds Slump on Mosul Seizure as Stocks Drop Most Since 2012. Iraqi bonds plunged and stocks fell the most in two years after fighters from a breakaway al-Qaeda group took control of Mosul in a move highlighting Prime Minister Nouri al-Maliki’s weakening grip on the country. The yield on the nation’s $2.7 billion of bonds due in January 2028 climbed 41 basis points to 6.91 percent at 12:13 p.m. in New York, the biggest jump in a year on a closing basis, according to data compiled by Bloomberg. The ISX General Index lost 4.6 percent in Baghdad, the most since June 3, 2012. Mosul, Iraq’s second-biggest city, is entirely in the hands of the Islamic State in Iraq and the Levant, or ISIL, with no army or police presence remaining, Noureddin Qablan, the vice chairman of Nineveh provincial council, said by phone late yesterday. Tribal gunmen allied to al-Qaeda were close to capturing Baiji, north of Baghdad and home to Iraq’s biggest petroleum refinery, Al-Jazeera television reported today.
- Ukraine Rejects Gas Offer as Talks End Without Deal. Ukraine rejected a Russian proposal for the price of future natural-gas deliveries as European Union-brokered talks in Brussels ended without an agreement. Russia offered to supply gas for about 20 percent below the current price, a level Ukraine said was still more than it’s willing to pay, EU Energy Commissioner Guenther Oettinger said at a press conference after the three-way meeting. Russia’s energy minister said the country also wants $1.95 billion for past fuel supplies before June 16 or it may cut shipments.
- Japan Says Chinese Fighter Jets Flew Near Its Planes Again. Chinese fighter jets flew “abnormally close” to Japanese military surveillance planes in the East China Sea, the second incident in less than a month, Japan’s Ministry of Defense said yesterday.
- Vietnam Says China Sent Six Warships to Rig in Disputed Seas. Vietnam said China again shifted an oil rig it has placed in disputed waters, with six warships guarding the structure as the two communist countries continue their South China Sea stand-off.
- RBC Among Canada Banks With Outlook Cut by Moody’s. Royal Bank of Canada and Bank of Nova Scotia (BNS) had their outlooks cut to negative along with the five other largest Canadian lenders by Moody’s Investors Service, which cited rules that would limit government support. Moody’s decision to reduce the outlook from stable reflects its view that the risk for the banks’ debt holders and uninsured depositors “has shifted to the downside,” the New York-based ratings company said today in a statement.
- Apple(AAPL), Starbucks(SBUX) Tax Deals With Irish, Dutch Probed by EU. Tax breaks for Apple Inc. (AAPL), Starbucks Corp. (SBUX) and Fiat Finance & Trade SA in three European Union countries are under investigation by EU competition regulators in a clampdown on special treatment for companies. The EU is checking whether the tax deals in Ireland, the Netherlands and Luxembourg are illegal state aid, according to an e-mailed statement today. Governments can be ordered by the European Commission to claw back unfair aid.
- Europe Stocks Drop as Lufthansa, Vallourec Cut Forecasts. European stocks fell from a six-year high as companies including Deutsche Lufthansa AG and Vallourec SA cut their profit forecasts. Lufthansa slid the most since September 2001 after lowering operating-profit estimates for this year and next. Vallourec SA plunged the most in two years after predicting earnings will drop 10 percent in 2014. Airbus NV lost 3.1 percent after saying Emirates canceled its order for A350 wide-bodied aircraft. Inditex SA rose 1.1 percent after posting first-quarter profit that beat analyst estimates, and saying it plans a share split. The Stoxx Europe 600 Index fell 0.6 percent to 347.74 at the close of trading, its biggest loss since May 15.
- Wheat Enters Bear Market as Corn Drops on Supply Outlook. World wheat inventories by the end of May will reach 188.61 million metric tons, the U.S. Department of Agriculture said today in a report. That compares with last month’s estimate of 187.4 million and 188.08 million forecast by analysts in a Bloomberg survey. The agency also increased its estimate for domestic reserves and said global corn stockpiles will rise to a 15-year high.
- Take Junk Loans, Add Leverage, Slice ’Em Up, Sell, Repeat. Here’s a brain twister: Some investors have grown tired of junk-rated loans, but others are more eager than ever to buy the same debt bundled together and sliced into pieces. Buyers are particularly hungry for the riskiest tiers of these collateralized loan obligations, investments that are the first to lose out if borrowers fail to make interest and principal payments. They also stand to reap bigger returns when companies pay back their loans. Principals at the private-equity firm Stone Point Capital LLC are seeking to capitalize on this boom in demand by starting a new closed-end firm focused mainly on buying the lowest-ranked tranches of CLOs. The proposed Eagle Point Credit Co. can use borrowed money to juice returns on speculative-grade securities backed by junk-rated loans, according to a June 6 filing with the U.S. Securities and Exchange Commission.
- Condo Towers Rise From Boston to L.A. in U.S. Rebound. For the first time since the U.S. housing crash, new condominium towers are sprouting in downtown Boston, Seattle and Los Angeles as developers bet on the return of the riskiest type of residential real estate.
- Your Outlet Knows: How Smart Meters Can Reveal Behavior at Home, What We Watch on TV. Smart meters may be getting too smart for our own good. As businesses look for new ways to gain insight into consumers, utility meters that wirelessly transmit energy-usage data are increasingly drawing attention because of what they can reveal about our behavior at home, such as when and how often we use certain appliances.
- More Than 1 in 5 Homes in Chinese Cities Are Empty, Survey Says. Southwestern University of Finance and Economics Analysis Finds 49 Million Sold but Vacant Units. The vacancy rate of sold residential homes in urban areas reached 22.4% in 2013, or 49 million homes, up from 20.6% in 2011, according to the Survey and Research Center for China Household Finance, which conducted the analysis.
- Eric Cantor to Step Down as House Majority Leader. No. 2 House Republican to Leave Leadership Post by July 31.
- Tensions grow in Hong Kong as China asserts control. White paper has territory worried about its freedoms. Seventeen years after Hong Kong’s transfer to Chinese sovereignty, concerns are growing in the former British colony about democratic rights and freedoms.
- Why Cantor lost. Cantor lost his race because he was running for Speaker of the House of Representatives while his constituents wanted a congressman.
- FBI director confirms criminal probe of VA. FBI Director James Comey confirmed Wednesday that the bureau's Phoenix branch has opened a criminal investigation of the Veterans Affairs Department, amid mounting calls on Capitol Hill for the Justice Department to get more involved.
- Hagel faces skepticism over claim freed Taliban members were only planners. Defense Secretary Chuck Hagel sought Wednesday to justify to skeptical lawmakers the controversial swap of five hardened Taliban leaders for Sgt. Bowe Bergdahl, claiming the former Guantanamo detainees were planners, and had not directly participated in attacks on Americans.
ZeroHedge:
- Will Spain Default?
- One Overlooked Reason Why The Middle Class Is in Decline. No wonder the wealth of the middle class keeps declining: every temporary gain from joining the investing feeding frenzy sets up staggering losses when the bubble du jour pops and there's nobody left to sell to. Meanwhile, those who bought early have long since sold out and are now buying outlier assets that are viewed as "risky" by the majority who happily accept high risk in return for temporary gains in the asset bubble of the day, guaranteeing a steady progression of losses and an erosion of real wealth.
Washington Post:
- The Return of al-Qaeda. The capture Tuesday of Mosul, the hub of northern Iraq, by al-Qaeda-linked militants is an alarm bell that violent extremists are on the rise again in the Middle East. And it's a good time for President Obama to explain more about how he plans to fight this menace without making the mistakes of the past.
- Merkel says latest ECB moves show euro crisis is not over. Germany's Angela Merkel said on Wednesday the European Central Bank's decisions to cut interest rates to record lows and pump money into the sluggish euro zone economy showed that the crisis in the European Union's single currency area was not yet over.
- IMF sounds global housing alarm. The world must act to contain the risk of another devastating housing crash, the International Monetary Fund warned on Wednesday, as it published new data showing house prices are well above their historical average in many countries.
- Iraq oil shock would kill world economic recovery, experts warn. As violence threatens Iraq's oil industry, experts fear crude at $130 per barrel would damage the global economy.
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