Daily Market Commentary for April 17, 2012
Futures market provided a nice respite of consistent trading ranges for Futures traders Tuesday, especially the emini futures - YM, NQ and ES.
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CME Group, the world's leading and most diverse derivatives exchange, released the following statement Tuesday regarding the Administration's proposal to increase oversight of energy markets: "CME Group agrees that manipulation is detrimental to markets and should be vigorously policed, as is currently being done. However, we caution against mistakenly categorizing speculation as a form of manipulation. Market makers and speculators, serve an important function in the market ? allowing energy users and producers to manage oil price risk and providing the necessary liquidity to ensure effective price discovery and more efficient transfer of price risk. The Administration's proposal to use margin requirements to control cash prices is misplaced. The Administration must recognize that exchanges, as the operators of regulated energy markets, are in the best position to monitor volatility and manage margin requirements. Margins are based on volatility and cannot be used to manage cash prices. Rather, they serve as important tools for CME Group and other exchanges to use in managing the financial risks of the clearing houses we operate, which are a key component of the risk management policies being put into effect under Dodd Frank. Additionally, taking away from exchanges the ability to manage margins would make the markets less efficient, less tied to fundamentals and would create the potential to push the hedgers out of the market, which would make oil more expensive for all consumers."
Citing improved financial conditions and unwinding of the financial crisis on Tuesday, the International Monetary Fund raised its forecast for global economic growth in 2012 and 2013, but warned that the recovery remains fragile. In an update of its world economic outlook, the Washington-based institution said it expects global output to grow by 3.5% in 2012, up from a January forecast of 3.3%. Global output is expected to expand 4.1% in 2013, up from the previous forecast of 3.9%. The only major country that had its 2012 growth outlook cut by the IMF was Spain with expectations of a decline of 1.8% from the previous forecast of a 1.6% drop. After a mild recovery in early and mid-2011, the Bank of Spain said earlier Tuesday that the Spanish economy is back in recession. The IMF said the European Central bank has some room to further lower interest rates as inflation is expected to fall below the central bank's 2% inflation target.
The Commerce Department reported Tuesday that builders began construction on new U.S. homes at a slower pace in March, but permits jumped to the highest level since September 2008. Housing starts fell 5.8% last month to an annual rate of 654,000 from a slightly revised 694,000 in February with permits increasing 4.5% to 747,000 in March from a revised 715,000 in February. The move is mainly because of a spike in requests to construct multi-dwelling buildings with five units or more. With permits for new construction viewed as a gauge of future demand, the latest increase suggests builders are becoming more optimistic. As builders continue to face pressure from the flood of foreclosed homes on the market, permits for single-family homes fell 3.5% to 462,000 during March from 479,000 in the prior month. Single-family homes account for about three-quarters of the market for new housing. Over the past 12 months, housing starts are up 10.3%. In the South, new home construction sank nearly 16% accounting for the entire drop last month. In the North, housing starts surged higher by nearly 33%. In the Midwest , housing starts moved up slightly by 1% while starts remain unchanged in the West. Over the past 12 months, housing starts are higher by 10.3%.
The Federal Reserve reported Tuesday that industrial production remained unchanged for the second consecutive month, in March. While utilities output gained 1.5%, manufacturing output slipped 0.2% while mining output rose 0.2%. Capacity utilization ticked lower to 78.6% from an upwardly revised 78.7%. Industrial production rose at a annualized rate of 5.4% during Q1 2012.
A challenging lawsuit was filed Tuesday by the mutual fund lobby group, the Investment Company Institute along with the U.S. Chamber of Commerce against the Commodity Futures Trading Commission rule requiring mutual fund managers to come under the agency's oversight. The pair argue that the rule 'layers' the CFTC's regulatory regime onto one that already exists at the Securities and Exchange Commission. Additionally, the pair say the CFTC failed to weigh the costs or benefits of the rule and that it will also impose 'redundant regulations' on exchange-traded funds.
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