General market outlook for May

With the incoming events in May, there would be something for everyone to watch whether you are trading FX, indices or shares.

April was a surprisingly positive month watching Wall Street indices chart its record close into the end of the month. It appears that the concerns over the US treasury yield curve inversion just a month earlier had been all pushed to the back of our minds.

Invigorating the markets through the month had been an array of factors including the stabilization of data indicators, improvement in geopolitical sentiment and earnings optimism. That said, as we approach the new month, one cannot help but ponder the veracity of the old adage of ‘sell in May and go away’ for markets and whether this would introduce some ripples into the month.

With the incoming events in May, there would be something for everyone to watch whether you are trading FX, indices or shares. On the central banks’ end, the supportive stance is expected to stay little changed as the Federal Reserve and Bank of England convene. Political events may be the highlight with the string of elections across the regions. In Australia, we will see the general elections take place on 18 May, while the European Parliament elections will be held between 23 - 26 May against the backdrop of a prolonged Brexit extension. In Asia, the Philippines and India will receive their election results on 13 May and 19 May respectively for regional markets to watch.

The more important geopolitical event would, however, be the resumption of US-China trade talks. The talks carrying through from April with back and forth trips from both sides set the expectations up for an announcement of a deal signing between President Donald Trump and President Xi Jinping. With the market largely priced in for hopes of resolution, this expectation would at the very minimum has to be extended to keep sentiment and markets afloat.

Not to forget, the series of data indicators remain under scrutiny for a global economy expecting broad growth slowdown this year. If March had been a month representing stabilising indicators across key regions such as China and the US from a weak start to the year, April was one to watch for confirmation of sustainability into Q2. These will play into trade both for equities and FX, with due attention on the greenback strength that had been building.

On commodities, the renewal of the uptrend into the end of the month for crude oil prices with the tightening of the sanctions on Iran by the US is another key theme. Not only is this important for oil-related assets, but further upsides seen may also reopen talks of inflation risks moving forward. Altogether, there appears to be much for markets to navigate in May to avoid diving into May.

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