Today's Headlines

Bloomberg:      

• Look Closer: 57% of China AAA Bond Issuers Have Junk-Like Risks. So you bought a top-rated yuan bond in China? Take a closer look. It may share characteristics with junk notes in the rest of the world. About 57 percent of bond issuers listed in China and whose securities are rated AAA in the nation may have default risk consistent with what Bloomberg’s quantitative, independent default-risk model deems a below-investment-grade company. The model tracks metrics including share performance, liabilities and cash flow. It doesn’t take into consideration guarantees or make assumptions about government support, regulations or future earnings.
• Euro-Area Growth Seen Slowing as Outlook Clouds Amid Weak Orders. (video) Growth in the euro area’s private sector unexpectedly slowed in May, signaling that the region won’t maintain the strong pace of expansion recorded at the start of the year. A Purchasing Managers Index slipped to 52.9 from 53 in April, London-based Markit Economics said on Monday. Economists surveyed by Bloomberg predicted an increase to 53.2. A gauge for services activity held at 53.1, while one for manufacturing fell to 52.4 from 52.6.
• IMF Calls on Europe to Give Greece ‘Unconditional’ Debt Relief. (video) Greece’s European creditors must give the nation “unconditional” debt relief for the International Monetary Fund to provide new financing, the Washington-based fund said, laying out its position as Euro-area finance ministers meet in Brussels to discuss the bailout.
• European Shares Slide as Bayer Leads Chemicals Drop, Oil Falls. (video) European shares retreated as chemical companies and oil producers tumbled, while investors speculated on the potential timing of a Federal Reserve interest rate increase. Bayer AG slid 5.7 percent, leading a measure of chemical shares to the biggest loss on the Stoxx Europe 600 Index, after disclosing terms of its offer to acquire Monsanto Co. amid concern that it’s stretching its finances for a deal. Fiat Chrysler Automobiles NV dragged carmakers lower after a report that the German transport authority accused it of manipulating pollution emissions, which it denies. Oil shares lost as crude retreated for a fourth day. The Stoxx 600 dropped 0.4 percent to 336.69 at the close of trading, after earlier gaining as much as 0.4 percent and falling 0.8 percent.
• Crude Falls as Canada to Resume Oil-Sands Output After Fires. (video) Oil dropped for a fourth day as producers in Canada worked to resume operations after wildfires and Iran continued to increase exports. July crude fell as much as 2.1 percent in New York. Cooler weather is helping to control a blaze in Canada’s oil-sands region and allowing Suncor Energy Inc. and Syncrude Canada Ltd. to start getting back to work. Iranian exports could surpass 2.2 million barrels a day by midsummer, the state oil company told the Mehr news agency. Declines eased after Genscape Inc. was said to report that supplies slipped at Cushing, Oklahoma, the delivery point for New York futures.
• OPEC Set for Another Meeting With No Deal After Doha Failure. (video) After failing to reach an accord on oil supply in Doha last month, OPEC is poised to go another meeting with no agreement on how much crude to produce. All but one of 27 analysts surveyed by Bloomberg said the Organization of Petroleum Exporting Countries won’t set an output target on June 2, as it sticks with Saudi Arabia’s strategy to squeeze out rivals including U.S. shale drillers by pumping near-record volumes. An accord on an output cap with non-members such as Russia collapsed in Doha last month when Saudi officials insisted Iran would need to take part.
• Iron Sinks as Swelling Stockpiles Follow Ill-Fated China Frenzy. Iron ore prices that soared amid China’s speculative frenzy last month just took another leg down, plummeting as rising port inventories in the top user spurred concern global supplies are once again topping demand. Ore with 62 percent content sank 6.7 percent to $51.22 a dry metric ton on Monday, taking losses from the peak of more than $70 in April to 27 percent, according to Metal Bulletin Ltd. The drop, the most since March 9, was preceded by a slump in futures in Asia, with the SGX AsiaClear contract falling as much as 6.3 percent to $45.72 as futures in Dalian closed at the lowest since February.
• El-Erian Says Fed Is Talking Up Rate Hike as July Odds Increase. (video) Mohamed El-Erian said Federal Reserve officials are promoting the idea that they’re preparing to raise interest rates, as a global bond market rally slows.Officials “continue to talk up” an increase, El-Erian, the chief economic adviser at Allianz SE and a Bloomberg View columnist, wrote on Twitter Sunday, as two more policy makers at the weekend signaled that a U.S. interest-rate increase is looming. The odds of the Fed raising rates in July have climbed to 48 percent from about 26 percent at the start of the month, according to data based on fed fund futures compiled by Bloomberg.
• Bullard Doesn’t See Brexit Chance Affecting Fed Policy Makers. (video) Federal Reserve Bank of St. Louis President James Bullard said he doesn’t see the U.K.’s vote on European Union membership influencing the U.S. central bank policy makers’ meeting that will be held the week before the referendum. He said that even if the U.K. decides to leave, “the next day nothing happens” and the country will enter into departure negotiations bound to go “very slowly.”
• Debt king Trump, bridge builder Clinton equal bigger deficits. The U.S. looks set to rack up bigger budget deficits in the coming years, no matter who is elected president. With Donald Trump declaring himself the "king of debt" and Hillary Clinton promising to "build tomorrow’s economy," the next administration seems likely to put more emphasis on fiscal largesse than on financial rectitude.

CNBC:

• Fed's Williams wrong, we’re not ready for more than 1 hike: Pro. (video)

Zero Hedge: 

• We're In The Eye Of A Global Financial Hurricane.
• Everything Changed In 1980 - Why The Fed Is Wrong. (graph)
• Brazilian Risk Assets Slammed After New President Suffers First Corruption Scandal Crisis.
• Keynes Must Die.
• Why One Bank Is Urging Its Clients To Dump. Oil. Now. (graph)
• Deutsche Bank Slides After Mortgage Probe Unveiled; Admission It Rigged Stocks. (graph)
• 'Father Of Modern Finance' Warns "Central Banking Is Like Pornography - Not The Real Thing".
• Brexit Scaremongering Taken To New Level With Threat Of "Year Long Recession".
• US Manufacturing PMI Collapses To 2009 Lows (As Fed Readies Rate Hike?). (graph)
• The "Doom Loop Is Coming Back" - Deutsche Bank Sees "No Further Upside For European Stocks".
• Never Been Richer - Investors Are Paying Historically High Multiples For Sales. (graph)
• Eurozone Business Growth "Unexpectedly" Slows Down To 16 Month Low. (graph)

Business Insider:

• The oil market's biggest problem is still far from solved.
• This is what Jim Chanos says he's telling his clients about China right now.

The Telegraph:

• AEP: Saudi financial crisis 'could leave oil at $25' as contractors face being paid in IOUs. Saudi Arabia faces a vicious liquidity squeeze as capital continues to leak out the country, with a sharp contraction of the money supply and mounting stress in the banking system.
• Should the Treasury's warning of a year-long, post-Brexit recession be believed, or is it just nonsense?

Caixin:

• Fed to Reduce Balance Sheet After Raising Rates. St. Louis Fed President James Bullard says Fed has never changed its plan to consider reducing balance sheet after raising interest rates for at least three to four times, citing an interview with the central bank official.