World Markets Lose Ground to Open Week; Bonds Set to Enter Global Bear?; Chinese Production Falters for First Time in Seven Months

World Markets Lose Ground to Open Week (YahooFinance)
Uncertainty about the Federal Reserve’s next move compounded Wall Street’s swoon last week and caused global markets to start off this week with significant downward momentum. Japan’s Nikkei 225 lost 3.72 percent today, while Hong Kong’s Hang Seng and Shanghai’s Shenzhen CSI 300 closed down slightly under 1 percent. At the time of this writing, European markets were mixed for the day with England’s FTSE 100 off .08 percent and Germany’s DAX and the EURO STOXX 50 up slightly. All three broad market U.S. futures had fallen more than 1 percent each. Along with everyone else, we’ll keep a close eye on the Fed as well.

Bonds Set to Enter Global Bear? (Bloomberg)
According to Bloomberg, last month’s losses in the world’s bond market were the steepest since 2004. Specifically, bonds were down 1.5 percent on average in May, with the average sovereign bond yielding 1.39 percent, which was just barely ahead of May 2’s record low of 1.14 percent. However, this is about half of the historic average yield of 3.64 percent. Yet, even at these close-to-record lows, we’re still not set up for a worldwide bear market in bonds, according to Robin Marshall, director of fixed income at Smith & Williamson Investment Management, “I’ve seen one [bear market] in the early 1980s, and this doesn’t look like it. Inflation is still very low, and we need to see more convincing evidence of the economy strengthening, not just in the United States but elsewhere.” Well, even if this isn’t technically a global bear for bonds, it’s at least a cub…

Chinese Production Falters for First Time in Seven Months (Reuters)
China’s HSBC/Market Purchasing Manager’s Index (PMI) fell to 49.2 in May to mark its lowest score since last October. Remember that a score of 50 for the PMI indicates economic and production expansion, compared to the month prior.  May’s score followed April’s 50.4 mark for the world’s second-largest economy.  Coming on the heels of China’s production contraction for the first quarter of 2012, May’s mark certainly has given pause to investors looking to China for profits. And the mood doesn’t appear to be getting any better as we push on into the second quarter. According to Zhiwei Zhang, chief economist at Nomura in Hong Kong, “We think China’s economic growth will probably continue to slide.”  So, be prepared to sit the summer out, rather than invest in China any time soon.