04.05.2016 - Falling markets in May is getting more real
The American stock market shows a decline amid worsening sentiment about the future prospects of growth of indexes, amid the fall of corporate profits, of companies which are included in the S&P500, for 4 consecutive quarters. In addition, the pressure on the dynamics of US assets has data from China on business activity in the industrial production. The decline in oil prices connected with the correction in commodity markets will have a negative impact on investor sentiment. Today, will be released the data on non-manufacturing PMI and the volume of factory orders in the US (14:00 GMT). The central event of the week will be Friday's release on the US labor market report. Our forecast for next week remains negative.
European stock markets showed a negative dynamics, due to the negative impact of foreign markets, lower prices for oil and other commodities, as well as the weak macro statistics. Thus, retail sales in the Eurozone fell by 0.5% in March, against expected growth of 0.1%, while service PMI in Eurozone totaled 53.1 in April from 53.2 in March. One of the key risks in the coming months is a possible exit of Great Britain from the EU structure. According to our estimates, the decline in European markets will continue under the pressure of negative dynamics in the Asian, American and commodity markets, but our medium-term outlook remains positive.
Markets in the Asia-Pacific region showed a drop because of weak statistics on the manufacturing PMI in China calculated by Caixin, which fell to 49.4 in April from 49.7 in March. Japanese markets are closed for holidays, and investors will return to the market on Friday. It is worth mentioning that yesterday, the Reserve Bank of Australia decided to lower the key interest rate to deal with deflation risks. Our medium-term outlook for markets in the region remains positive, but there is a high probability of falling in the near future.