ART CASHIN: 'Markets Fear Musical Chairs May Have Started'

50 Plus NorthThe U.S. stock markets are open, and they are in the red

Europe is doing even worse.  Asia, which has been closed for a few hours, saw Japan’s Nikkei plunged a horrific 7.3%.

This comes after a disappointing Chinese PMI report, which suggested manufacturing activity was actually contracting.

Europe and Asia are also catching up with Fed Chairman Ben Bernanke, who told us yesterday that they could start tightening monetary policy within the next few months.

Bernanke has some people worried that changes made by the Fed could cause money rotate out of the stock and bond markets.

Perhaps, this is what’s going on today.

Here’ UBS’s Art Cashin:

Overnight Volatility – What happened in the U.S. looked to have a somewhat muted impact in Tokyo.  Japanese stocks opened higher and then fell through their own trapdoor.

China’s Purchasing Managers Index fell to 49.6.  Not only was that the first full drop in seven months, it moved the number into recessionary territory (China?  Recession?).  The Nikkei plunged 9% (1400 Dow points) from the high to down 7.3% (1100 Dow points).  The yield on the JGB 10 year shot above 1% (that’s nearly 200% since the BOJ went aggressive).

The plunge in Japan, right on the back of the sharp U.S. reversal, has a sea of red ink flowing around the globe.  Bond pits are especially nervous.

Consensus – A big surprise in claims could shake things up.  Markets fear musical chairs may have started.  Bernanke must bring back some sense of certainty or…..  If bulls can regain momentum, they may claim invincibility.  May you live in interesting times.  Stay very, very nimble and have a great Memorial Day Weekend!

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