CME Group UPGRADED to neutral

CME Group Inc. was upgraded to neutral from underweight at J.P. Morgan Chase & Co. as the company’s interest rate futures business sees volumes surge on higher volatility and investor repositioning produces elevated activity levels. But despite hiking his price target on CME shares to US$72 from US$52.50, analyst Kenneth Worthington remains cautious. He declined to recommend the stock, given both its valuation and the potential for volatility to stabilize and volumes to normalize. “The thought is that while CME volumes have been depressed for some time, they are likely being overstated currently,” Mr. Worthington told clients. “However, even if CME is over-earning, we don’t see the near-term catalyst for such volatility to wane.” He noted that volumes continue to be strong on minor news, suggesting higher volume levels may remain for some time. CME shares have surged more than 25% since May 1 on a dramatic recovery in trading volume, primarily in the company’s fixed-income business. CME, the world’s largest future exchange operator, owns and operates derivatives and futures exchanges in Chicago and New york, as well as online trading platforms, the dow Jones stock and financial indexes, and CME Clearing Services.