Spain 10-Year Gov't Yields Test Pivotal 7.0% Level Following Downgrades

(RU) Russia Gold % Forex Reserves w/e Jun 8th: $512.4B v $509.2B prior

(EU) ECB: €789M borrowed in overnight loan facility vs. €2.4B prior; €703.5B parked in deposit facility vs. €798.2B prior (new reserve period)

(DE) Germany May Wholesale Prices M/M: -0.7% v +0.5% prior; Y/Y: 1.7% v 2.4% prior

(FI) Finland May CPI M/M: 0.0% v 0.0%e; Y/Y: 3.1% v 3.1%e

(IN) India May Wholesale Price Index (WPI) Y/Y: 7.6% v 7.5%e

(ES) Spain Q1 House Prices ToT Homes Q/Q: -5.0% v -4.2% prior; Y/Y: -12.6% v -11.2% prior

(CN) China Q1 Current Account Balance: $23.5B v $59.8B prior

(CH) Swiss National Bank (SNB) leaves the 3-Month Libor Target Rate unchanged at 0.00% and reiterated to enforce cap on Franc of 1.20 per Euro

(NL) Netherlands Apr Retail Sales Y/Y: -8.7% v 2.4% prior

(NL) Netherlands Apr Trade Balance: €4.4B v €4.1B prior

(AT) Austria May Consumer Price Index M/M: -0.1% v +0.4% prior; Y/Y: 2.1% v 2.3% prior

(PH) Philippines Central Bank leaves the Overnight Borrowing Rate unchanged at 4.00%

(HK) Hong Kong Q1 Industrial Production Y/Y: -1.6% v -2.2% prior

(HK) Hong Kong Q1 Producer Price Y/Y: 3.6% v 6.6% prior

(IT) Italy Apr General Government Debt: 1.948T v €1.946T prior

(EU) Euro Zone Q1 Labor Costs Y/Y: 2.0% v 2.6%e

(EU) Euro Zone May CPI M/M: -0.1% v -0.2%e; Y/Y: 2.4% v 2.4%e; CPI Core Y/Y: 1.6% v 1.6%e

(GR) Greece Q1 Unemployment Rate: 22.6% v 20.7% prior

Fixed Income
(RU) Russia sold RUB13.6B vs. RUB20.0B indicated in 2022 OFZ Bonds; Yield 8.64% vs. guidance 8.55-8.65%

(IT) Italy Debt Agency (Tesoro) sold total €4.5B vs. €2.75-4.5B indicated range in 2015, 2019 and 2020 BTP bonds

Sold €3.0B vs. €3.0B indicated in 2.5% Mar 2015 BTP; Avg Yield 5.30% (highest since Dec) v 3.91% prior; Bid-to-cover: 1.59x v 1.52x prior

Sold €627M in 4.25% Feb 2019 BTP; Avg yield 6.10% v 5.21% prior; Bid-to-cover: 1.99x v 2.27x prior

Sold €873M in 4.25% Mar 2020 BTP; Avg Yield 6.13% v 5.33% prior; Bid-to-cover: 1.66x v 2.08x prior

(UK) DMO sold £1.5B in 4% 2060 Gilts; Avg Yield 3.278% v 4.150% prior syndicate; Bid-to-cover: 1.81x; Tail 0.7bps

(HU) Hungary Debt Agency (AKK) sold total HUF59B vs. HUF45B indicated in 2015, 2017 and 2022 Bonds - 6:30 (PL) Poland to hold exchange offer Auction

Notes/Observations
Moody's cuts Spain sovereign to lowest level of investment grade; new plan increases debt burden.

RBNZ leaves interest rates unchanged at 2.5% (as expected).

Spain 10-yield hits fresh EMU record high as its tests 7.00%.

Italy auction results sees broadly higher yields but sells upper end of range.

SNB leaves interest rate unchanged and maintains EUR/CHF floor at 1.2000.

Key question for upcoming FMOC decision is whether economic growth is fast enough to make material progress in reducing unemployment.

Credit Agricole (Greece's largest foreign ban) warned it would abandon operations in Greece if they leave the EMU.

PIMCO drops bunds from its portfolio. "Germany is losing quality due to conditional liabilities that are piling up on bunds."

Equities
FTSE 100 -0.90% at 5433, DAX -1% at 6090, CAC-40 -0.90% at 3003, IBEX-35 -0.20% at 6600, FTSE MIB -0.90% at 12,773, SMI -0.80% at 5895

European equity indices have continued to trade mostly in negative territory (FTSE MIB in Italy underperforming), as Italy sold 2015, 2019 and 2020 bonds. European banks are currently trading mixed, as Spain's 10-yr yield has hit a new record high near 7% (a level deemed by some to be unsustainable). In news related to Spanish banks, ECB data showed that institutions in the country have continued to increase their reliance on the central bank (Spain May ECB banks borrowing at record high €324.6B v €316.9B prior in April). Also, following yesterday's close Spain's Economy Ministry stated that there were no plans to liquidate any banks in the country. The comments came after EU official Almunia said that liquidating troubled banks was an option in certain cases. In terms of commodity related companies, most of the UK listed miners are trading lower (Xstrata -3.5%, Rio Tinto -2%), following cautious comments out of BHP regarding the outlook for commodity prices.

In Finland shares of Nokia [NOK1V.FI] have declined by over 6% as the company lowered guidance for its Q2 devices/services unit operating margin. Additionally, the firm announced management changes and a plan to cut up to 10,000 (~7% of total workforce).

UK listed luxury retailer Mulberry [MUL.UK] has declined by over 22%, amid concerns about slowing growth. The company reported FY11/12 sales growth of approx. 39%, but noted that its retail sales were only higher by 12% for the 10 weeks to June 9th. Shares of British Sky [BSY.UK] and BT Group [BT.UK] are trading lower, as there are some concerns about the amounts that the firms paid to win the broadcasting rights to the UK Premier League soccer matches. UK Banks are trading mostly lower ahead of Chancellor Osborne's comments on the Vickers banking reforms. In other UK movers, shares of Carphone Warehouse [CPW.UK] are higher by ~1% (issued FY12 results), while technology services firm Computacenter [CCC.UK] has declined by over 15% (issued trading update).

German solar-related names are mostly lower (including Wacker Chemie [WCH.DE] and Solarworld [SWV.DE]) amid reports that Germany's government was unable to reach an agreement related to solar subsidy levels. Centrotherm [CTN.DE] has lost over 30%, on concerns that certain credit insurers have refused to lend to the company. In other German movers, Kabel Deutschland [KD8.DE] is lower by over 2% after issuing Q4 results and its initial outlook for FY13, while Heidelberger Druck [HDD.DE] is slightly higher (issued final Q4 results and affirmed its medium-term targets). In France, Technicolor [TCH.FR] has gained over 4%, after receiving a revised offer from Vector Capital. Credit Suisse [CSGN.CH] has declined by ~8%, after SNB official Dathine said the firm needs to strengthen its capital base.