Capital Markets: "Sell in May?"

From Marc to Market:

Overview: The retreat in US stocks yesterday, coupled with disappointing earnings news, has sent equity markets lower today. However, the May Day holiday has closed most markets, warning of spill-over at the start of next week, though China's markets are closed through next Tuesday and Japan through next Wednesday. In the Asia Pacific region, only two bourses were open, and they both were sold aggressively. Australia's benchmark fell 5%, and the Nikkei slid 2.8%. In Europe, the UK is open, and the FTSE 100 is off around 2% in late morning turnover. US shares are heavy, and the S&P 500 is poised to gap lower. The US 10-year yield is off a few basis points to hover near 60 bp. The dollar is mixed. The dollar-bloc currencies and the Scandis are nursing losses in the risk-off mood, while the euro has joined the yen and Swiss franc with small gains. Emerging market currencies are mostly weaker, led by South Africa, Turkey, and Mexico. Gold settled below $1700 yesterday, and follow-through selling may be setting up for a test on the $1640-$1650 support area. June WTI that had neared $10 a barrel earlier this week, briefly poked above $20 today where it met a wall of sellers.

Asia Pacific
Australia's manufacturing indices tumbled. The AiG and CBA measures fell further in April, with the latter decline more than the preliminary estimate. Separate reports warned that given the public assistance sought and unprocessed claims, unemployment may be surging above 10%.

Japan reported vehicle sales in April fell by a little more than a quarter year-over-year. In March the decline was about 10%. Separately, Tokyo core CPI fell below zero in April (-0.1%) from 0.4% in March and weaker than expected. This hints at the risk that the core rate for the country also so the return of deflation. Japan's core rate excludes fresh food. When both energy and fresh food are excluded, Tokyo's CPI fell to 0.2% from 0.7%....

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