Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1370.2	6.3	0.46%
Eurostoxx Index	2334.3	33.1	1.44%
Oil (WTI)	103.8	0.9	0.85%
LIBOR	0.466	0.000	0.00%
US Dollar Index (DXY)	79.54	-0.018	-0.02%
10 Year Govt Bond Yield	1.99%	0.01%
RPX Composite Real Estate Index	172.3	0.3

Markets are higher this morning on a better than expected German investor confidence data and a decline in Spanish bond yields. Bonds and MBS are lower. After falling out ifs narrow 140 -144 trading range, June 10 year bond futures are back in it again, driving mortgage rates back to February levels.

Johnny John reported better than expected numbers, as did Goldman, who also bumped up their dividend. Ex-highflyer First Solar is cutting 30% of its workforce.

Housing starts missed estimates by a wide margin, falling sharply from 694k in February to 654k in March. Remember, 1.5 million is more or less "normalcy," and having starts heading downwards for two months in a row this late in an expansion is not a good sign. Optimists will point to the unexpected increase in permits. Nevertheless, forward-looking economic indicators are starting to turn down, indicating the economy is slowing. Remember, the Bush tax cuts expire Jan 1, and that will provide a large fiscal drag. Business (and the markets) are going to start handicapping the possibility of an early 2013 recession, which should mean a slowing economy this summer and into the fall.

Industrial Production was flat in March, vs a .3% increase. Capacity utilization ticked down .1% to 78.6%, still below the historic 80% average. This shows there is still a lot of slack in the economy, which bodes well for the inflation numbers.

The rental market continues to outshine the purchase market, according to Zillow. The rent index increased 2% YOY in February, while the Zillow home value index dropped 4.5%. The huge backlog of foreclosures remains a wet blanket on the home value index, while ex-homeowners are driving rental prices higher. Localities like Chicago and Philadelphia showed huge divergences.

As if Spain didn't have enough headaches, Argentina is expropriating Repsol's 51% stake in YPF. Latin America has been one of the bright spots for Spanish banks, so if money starts fleeing the area, it will put further pressure on the Spanish economy. Granted, Brazil and commodity prices are going to be the main factor, but forced nationalization tends to make emerging markets investors nervous.

Are you trading gasoline futures? If so, the Obama administration is taking aim at you. Worried that high prices at the pump may endanger his re-election campaign, the administration has announced a series of measures aimed at reducing speculation in the gasoline futures market. The most significant measure would allow the CFTC to increase margin requirements (never mind that the exchanges can do this already..)