U.S. Stock Market

U.S. Stocks Mixed Ahead Of Memorial Day Weekend

U.S. – China Tensions Increase On A Daily Basis

S&P 500 futures were losing ground in early morning trading but then managed to recover.

The major sell-off in Hong Kong impacted early trading. China is set to impose new legislation that will target pro-democracy protests in Hong Kong.

Market participants are afraid that additional clampdown on Hong Kong’s freedoms will lead to a loss of its international finance center status.

The U.S. has already criticized the upcoming law and promised to react if the law is implemented.

While the first phase of the trade deal between the U.S. and China is being implemented despite coronavirus pandemic, the market fears that U.S. efforts to contain rising influence of China will destroy some supply chains and hurt the world economy at a time when it suffers from consequences of virus containment measures.

China Drops GDP Target

Another news that impacts today’s trading also comes from China. Previously, China openly announced its annual GDP growth target and worked to achieve it.

This time, China decided not to set such goals as the coronavirus pandemic created too much uncertainty. China’s Premier Li Kequiang also added that trade situation remained very uncertain, hinting at the increasing tensions with the U.S.

China’s decision not to set GDP growth target is especially negative for the resource sector as China is a major consumer of resources. Crude oil is already correcting from previous highs, while the other China-sensitive resource, copper, is also under pressure.

Argentina Is On The Verge Of Default

Argentina continues negotiations with its creditors in order to restructure $65 billion of debt. Argentina’s finances were in rather poor shape before COVID-19 hit the world economy, and the virus pushed the economy into the abyss.

If Argentina defaults on the upcoming $500 million bond payment, it will have a ninth default. It remains to be seen whether the country will maintain full access to financing after the default, but I’d note that previous defaults did not stop various institutions from lending to Argentina.

Potential negative impact  on the world markets may be limited by the huge monetary stimulus that was implemented by the world central banks to support economies during the current crisis as there’s no liquidity shortage in the world right now.