Sell in May and come back on St Leger Day
Fiona Cincotta May 4, 2020 7:32 AM
The old adage “Sell in May and come back on St Leger Day” isn’t looking like such bad advice so far.
The old adage “Sell in May and come back on St Leger Day” isn’t looking like such bad advice so far. After a steep sell off in stocks on Friday, renewed tensions between US and China is dragging on risk sentiment again at the start of the week, dragging on stocks and boosting safe haven flows. Oil prices are once again tumbling on trade war fears and rapidly filling storage. With a shortage of data releases risk sentiment will be a key driving factor across today’s session.
After a weekly gain of 16.7% last week, oil is once again under pressure. WTI is trading down over 7%, through $18.50 pb, hit by the prospect of a trade war strangling the global economy, supressing oil demand further, in addition to persistent concerns about over supply and inadequate storage. Economies are starting to reopen, however this is happening at a very gradual pace. Demand for oil is not expected to pick up sharply any time soon. In the meantime, with too much oil glugging round the system pressure will keep prices below $20 for the time being.
In Europe attention will shift towards manufacturing PMI readings. So far, the manufacturing sector has held up better that the service sector, experiencing less of a covid-19. However, expectations are still weak, particularly given that most countries were in lockdown for the full month of April. Eurozone manufacturing pmi is expected at 33.6 in April, down from 44.1 in March, whilst Germany at 34.4 down from 45.4 in April. EUR/USD is already moving lower in risk off trading, weak PMI readings could drag the common currency towards $1.09.
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