It was a quiet end to the week in the US as most Americans started to leave work (home) for Memorial Day holiday, which usually signals the start of summer; this year will be somewhat different but it looks like the in-laws’ lake camp in upstate NY is already getting a good workout. With the US on holiday on Monday, it’s unlikely to be a busy start to the week.
The big focus for investors is the rising tension between the US and China, with Beijing warning the US that it is pushing the two countries towards a ‘new cold war’. China’s Foreign Minister Wang Yi said on Sunday both China and the United States needed to avoid a new cold war as he blamed ‘a political virus’ spreading in Washington for their worsening relationship. This is on top of renewed protests and fighting in Hong Kong, surrounding the new regulations.
Other than that, Australia’s government must figure out whether to spend or save the $60bn that it found down the back of the sofa in loose change, and doesn’t now need the full $130bn for JobKeeper assistance. It will be also interesting to see if that huge change impacts on Australia’s credit ratings.
As largely expected, Hertz filed for bankruptcy. It joined an ever-growing list that includes well-known names, JC Penney, J. Crew, Neiman Marcus, Gold’s Gym, Pier 1 and the McClatchy newspaper chain. More employees will have lost their jobs, used-car prices will take a hit and bondholders will be in another fight to get to their cents back.
US equities closed mixed between up 0.4% (Nasdaq) and down 0.1% (Dow). European bourses were mixed and closed between up 0.2% (Italy) and down 0.4% (UK).
UST 10yr yields were at 0.66% (-1bp). ACGB 10yr yields closed at 0.85% (-7bp). The Aussie dollar was 0.2c lower at USD65.4c.
Credit was mixed but generally better offered: US IG closed at 87 (+1) and HY was at 624 (+7). In European credit, IG closed at 79 (-1) and XO was at 478 (+2). Aussie iTRAXX was at 108 (+1).
Elsewhere, oil was down 1.0-1.3%. Iron ore was up about 0.3%.
Tin hats on!
