Sell in May and go away. Markets for the week ending 27-May-10.

Investors seemed to have heeded the old adage "Sell in May and go away".

US stocks on Dow Jones Industrial Average fell below 10,000 for the first time since Feb-2010 as sovereign debt woes continue to unsettle global stock markets compounded by last Friday's announcement by Fitch to downgrade Spain's sovereign debt rating by one notch to AA+ becuase of the country's sluggish outlook for economic growth.

May's slump in risk assets were also excerbated by geopolitical risks in the north Korean peninsula and China tightening of monetary policies.

This month, we have also seen the consensus over a Chinese reminbi revaluation crumble apart as analysts and traders changed their forecasts for a modest Chinese revaluation to none at all for the next 12 months. This is largely prompted by the sharp fall in the euro against the dollar driven by the euro crisis. In euro terms, the renminbi has risen 13% against the euro so far this year, threatening profit margins of many chinese companies who export to Europe.

So, any further speculation of revaluation on the renminbi is going to be closely tied to outlook of the European debt crisis and whether euro/dollar will plunge further.

Eric Tan,
London