Daily Market Color May 27, 2020Risk Assets Higher Once More as EU Commission Announces New Stimulus Don’t fight the Fed (or the EU commission). Stocks rose sharply across the board yesterday as the pandemic narrative shifted firmly towards reopening. St. Louis Fed President Jim Bullard added to the optimism, saying he sees unemployment falling back “below double digits” by the end of the year. The S&P 500 and DJIA ultimately rose by 1.22% and 2.17% respectively- the former now a mere 13% away from all-time highs. Treasury yields and swap rates followed risk assets higher, the 10-year yield climbing 4 basis points to 0.70%. This morning, risk assets are higher once more after the EU Commission put forth a €750B stimulus package comprised of grants for member states and loans. The package would be funded by a joint-issuance of debt by Eurozone members- a quasi “Euro Bond” (but one that stops short of debt mutualization). US plans retaliatory measures against China. Legislation already passed by the Senate and now pending House approval calls for increased audits for the 200 US-listed Chinese companies, and potential removal from US exchanges altogether. The legislation comes as the US and China continue a war of words over the origination of the COVID-19 virus and as protests resume in Hong Kong. U.S. Secretary of State Mike Pompeo and President Trump are said to be discussing other retaliatory measures, including potential visa restrictions for Chinese students. Day ahead. Today is light on new economic data. St. Louis Fed President James Bullard is scheduled to speak on the current economic outlook. The beige book, which compiles commentary of current economic conditions from Fed leaders, will be released later today. Economists will look closely to see if the comments hint at future Fed policy changes.