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EU mulls banking union. A European Commission report proposes that the eurozone set up a "banking union" that would allow the ESM rescue fund to directly inject cash into lenders and recapitalize them. Such a setup would allow, for instance, much of the issue regarding Spain and its banks to go away. Expect German/ECB denials soon, but the news has put a zip into the markets, with the euro leaping about 30 pips against the dollar.

Spanish yield surge halted. Spanish 10-year bond yields were +20 bps to 6.64% midday in Europe and past pre-ECB LTRO levels but off earlier highers following the "banking union" news. Yields surged after Egan Jones downgraded the country's debt further into junk status and following a now denied report that the ECB has rejected a government plan to tap central bank cash to rescue Bankia. Meanwhile the EU may give Spain an additional year to meet its budget deficit target of 3%. Opinion: Spain is serving too many masters.

RIM in downward motion following FQ1 warning. RIM (RIMM) shares were -5.6% premarket after the company forecast a shock operating loss for FQ1, announced more job cuts, and said it had hired JPMorgan and RBC to assist with a "strategic review" that will cover licensing and partnership opportunities. However, RIM provided no details of the loss or staff cuts, nor did it say that it was considering a sale. Opinion: RIM investors should sell now.

Top Stock News
Cook keeps the rumor pot on the boil. Tim Cook told the AllThingsD conference that Apple (NASDAQ:AAPL) plans to "double down" on secrecy, but provided enough hints to keep the Apple obsessives in a frenzy for months. The company's TV box is "an area of intense interest," "we can do more" with Facebook (NASDAQ:FB), and on different-sized iPads and iPhones, "if we find we can do more, great." Opinion: 7 things that can hurt Apple.

Publishers poised to enjoy national curriculum boon. Pearson (NYSE:PSO), McGraw-Hill (MHP) and other publishers are set to benefit from the introduction in 45 states of national curriculum standards in public schools. The resulting increased demand for new textbooks, tests and teaching materials could be worth $1B-$8B, a study says, although whether states will be able to afford the costs is a major question. Opinion: E-textbook winners and losers.

Sony, Panasonic compete in Olympus race. Sony (NYSE:SNE) and Panasonic (PC) are the lead contenders to take an equity stake in Olympus (OTCPK:OCPNY), the Asahi Shimbun newspaper reports (via Reuters). A decision is expected by the end of June, with the winner likely to take a 10%+ holding worth several hundred million dollars. Opinion: Lights out for camera makers?

Facebook's Instagram purchase not so instant after all. The FTC has presented Facebook (FB) with a "second request" related to its acquisition of Instagram. The agency wants large volumes of data, guaranteeing a lengthy review. Facebook and Instagram's joint dominance of the mobile photo-sharing market and the recent launch of Facebook Camera are probably weighing on regulators. Meanwhile, shares tumbled another 9.6% yesterday to hit $28.84. Premarket today, they were -1.6%. Discussion: Does the ad click model work?

Dunkin' goes for an international slam dunk. Dunkin' Brands (NASDAQ:DNKN) plans to open 350 to 450 new outlets next year outside the U.S. in a big bet that global consumers want new American fast food options. The company expects Asia to see the biggest influx of new outlets.

Microsoft hopes to end Motorola IP battle. With Motorola now under Google's (NASDAQ:GOOG) control, AllThingsD reports that Microsoft (NASDAQ:MSFT) hopes a settlement can be reached in the companies' bitter patent dispute, which has resulted in Android and Xbox injunctions flying left and right. Microsoft and Motorola were close to a deal last summer but aren't any more. Opinion: Microsoft could double by 2015.

Top Economic & Other News
Italian yields track those of Spain. As with Spain, Italian 10-year bond yields were also rising this morning, soaring 23 bps and passing 6% following a less-than-stellar auction in which the government sold €5.73B of five and ten-year paper vs. a target of €6.25B. On the 2017 debt, yields rose to 5.66% from 4.86% in a sale in April, and on the longer bonds, the coupon increased to 6.03% from 5.84%. Opinion: New fault line at the heart of Europe.

Round and round the aid money goes. Greece's €130B of bailout funds are mainly being used to service the interest on the country's debt, reports the NYT, so the money coming from the Troika is flowing right back into their own pockets. Opinion: Euro/S&P 500 correlation is misunderstood.

Today's Markets:
In Asia, Japan -0.3%. Hong Kong -1.9%. China -0.2%. India flat.
In Europe, at midday, London -1.9%. Paris -0.8%. Frankfurt -1.5%.
Futures at 7:00: Dow -0.6%. S&P -0.6%. Nasdaq -0.6%. Crude -1.4% to $89.53. Gold +0.2% to $1554.30.

Today's economic calendar:
7:00 MBA Mortgage Applications
7:30 Challenger Job-Cut Report
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
10:00 Pending Home Sales
1:00 PM Fed's Dudley: 'Job polarization and rising inequality'
1:20 PM Fed's Fisher: 'Federal Reserve Operations and Economic Update'
4:30 PM Fed's Rosengren speaks at Worcester Regional Research Center.

Notable earnings after today's close: LGF, TIVO

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