Bloody global markets we’ve seen on May, most of them got a largest hit for several months as a spate of slowing global economic growth added to worries about the euro zone crisis, all cutting exposure to risky assets.
And many investors braced for another round of risk aversion on this Friday should the U.S. monthly jobs report contain weaker numbers than preliminary data issued by a payroll processor on Thursday.
Markets got an inkling of what was to come in Friday’s U.S. jobs report after payrolls processor ADP said private employers created 133k jobs in May, less than the expected 148k. New claims for unemployment benefits rose by 10k for the 4th straight weekly increase.
Investors were also dismayed by another report on economic growth and manufacturing in the U.S. Midwest that pointed to a slowdown.
On May, the S&P 500 was down 6 percent, its biggest drop since September. European stocks and global equities tumbled 7 and 10 percent respectively, also marking the sharpest loss since September.
Oil ended May with their biggest monthly decline in more than 3 years, around 15 percent, as economic worries dampening oil demand prospects.
Gold also notched a 6 percent monthly drop in May, its fourth straight monthly decline that is the most in 12 years as bullion investors have liquidated amid sell-offs in equities and commodities.
Are we going to see the bloody markets again on June when the global main focuses are awaited during that month? ECB Meeting (June 06, 2012), Greece Election (June 17, 2012), and G-20 Meeting (June 18-19, 2012).
Here is a quote from Anthonny Cammara, a blog writer of MonkeysAndElephants.com – a financial markets blog – that I think is nice for this early June
June 2012 is like a big ticket casino; whatever your pleasure, it will deliver. Looking for a little Chinese economic data? It's got that right by the slot machines over there. Interested in some U.S. jobs data? Look beside the roulette table. Is it ECB or euro leader meetings that tickle your fancy? Well walk down this aisle, make a left at the Pai Gow table and there you go. More of a high roller and are hankering for a little FOMC meeting action? Well walk into the high stakes parlor and look beside the $10,000 a hand blackjack tables. June 2012 offers you all the same thrills, chills, and money making potential of your favorite Las Vegas Casino.
And the following will be the preview of the near term global market focuses:
June 1st 2012
Chinese PMI Data
China’s manufacturing Purchasing Managers’ Index was 50.4 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today. The reading grew less than 53.3 in April.
That may be early negative stage for this month before U.S. employment reports. Asian stocks fell, extending the largest monthly drop since 2008, U.S. equity futures and crude oil slid 0.5 percent respectively after Chinese PMI data.
However, we have to see further respond from the data whether it makes Chinese officials state and outline their easing strategy (cutting interest rates and reserve rate). If yes, then markets may halt and reverse the recent drop.
U.S. May Unemployment Report
This report is expected to show an increase of 150k jobs (Reuters’ poll) in May versus 115k in previous, but market reaction to this number will be hard to predict. If the jobs number misses and it is weak, we could actually see a market rally as investors think this will force the Fed's hand at the FOMC meeting June 19-20 to implement QE3. An inline or a beat could have a muted upside movement as this jobs number is far from robust jobs growth but could cause the Fed to sit on their hands a bit longer and not implement QE3.
June 6th 2012:
We get the ECB rate meeting. Will the ECB cut rates to spur growth? Will they signal that they are getting ready to ease (print more euros)? If the answer to one or both of these are "yes," then the markets will rally as the investors will see that Europe is serious about controlling this crisis. If we get nothing, well then that's what you should expect from the market.
June 7th 2012:
Bernanke will be testifying before the Congressional Joint Economic Committee. Investors will be paying close attention to what Bernanke says, as they will try to gather clues as to whether he is planning to announce QE3 at the June FOMC meeting. If Bernanke hints that another round of QE could be on its way, well then the markets will rally. The jobs numbers on June 1st would have to be pretty bad for him to tip his hand and suggest easing is on the way.
I expect he will keep the same language as his previous few meetings where he states that the Fed is monitoring the situation and will step in if need be.
I still believe, since U.S. financial crisis in 2008, that any easing action from any central banks as a respond to trouble economy will invite fast reaction in financial markets. It may give signal that market may hit the bottom. Let’s look for and do hope for the best...
But always prepare for the worst that Mr. Nico Omer said on May 24th’s Daily Commentary:
...stay cautious and always keep in mind that bottoms normally do take a while to form. Just take it slowly, and one day at a time.
While Teeka Tiwari from The Tycoon Report said:
Always remember that the market hates uncertainty, and we have some big unknowns right now. Short term investors will want to go with the current trend and look for shorting opportunities on rallies. However, long term investors should be looking at this pull back as a buying opportunity.
The thing that is certain today is uncertainty still on the markets. What should we do as investors in that time?
This is the last thing in this report, quoted from Jim Rogers told CNBC.com on mid May:
Roiling capital markets aren’t going to calm any time soon so investors would be better off putting their money in hard assets like gold, silver and agricultural commodities.
I own real assets because if the world economy gets better I’ll make money because of shortages and if things get worse they’ll print more money,
Posted by Rekhmen Abadi