Daily Market Color May 3, 2016Strong Risk Off Sentiment Following Weak Data Abroad Following global equities, US stocks plunged today while Treasuries rallied strongly across the curve as disappointing data out of China and Europe and mediocre corporate earnings reignited global growth concerns. Similar to the government’s official reading released Sunday, the Caixin-Markit China manufacturing PMI missed analysts’ expectations. The index fell 0.3 points to 49.4 from 49.7 in March, and missed the 49.8 expectation. The sub-50 reading shows Chinese factory production contracted for the 14th consecutive month, as new exports continue to be a drag on the index off the back of weak international demand. Similarly, the Markit UK manufacturing PMI also missed expectations (49.2 vs. 51.2e), falling to the lowest level since April 2013. Some factors contributing to the steep decline include volatility in the oil and gas industry, a decline in retailer confidence, and the uncertainty created by a potential “Brexit” in June. The data is especially worrisome given GDP growth is already slowing and the Bank of England is running out of stimulus measures at its disposal. Other news abroad included the European Commission cutting its inflation forecast and warning of slower than previously expected growth in the euro-zone, and the Royal Bank of Australia unexpectedly cutting its interest rates to record lows. While weak data abroad dictated most of today’s negative sentiment, traders have also been closely watching US corporate earnings, new corporate debt issuance, and comments from Fed officials ahead of Friday’s all-important payrolls release. The Fed has maintained its pledge to be data-dependent, and Atlanta Fed President Lockhart said the Fed could still go forward with two interest rate hikes this year versus the one hike currently implied by market trading levels. All three major US stock indexes are currently down about 1%, Treasury yields and swap rates are down 4-8 bps across all major maturities, while WTI crude extends its tough start to the week, falling another 2.5%.