S&P 500 Futures print mild gains, Nikkei 225, yields stay pressured ahead of Biden-NATO meet
|- Market sentiment remains cautiously optimistic ahead of key data/events.
- S&P 500 rise 0.20 but Nikkei 225 drop more than 1.0%, US 10-year Treasury yields retest 2.30% level.
- USTR announcement, pullback in yields favor bulls even as escalation in the Ukraine-linked fears test market’s optimism.
- Preliminary readings of US PMIs for March, February’s Durable Goods Orders and Biden’s Europe visit will be crucial.
Global markets remain cautious, despite mildly positive S&P 500 Futures, heading into the key data/events on Thursday. Other than the pre-event anxiety, mixed signals concerning the Ukraine-linked market fears and the Sino-American trade relations also challenge the market participants of late.
That said, the US 10-year Treasury yields decline 1.5 basis points (bps) near 2.30% at the latest. It should be noted that the benchmark bond coupons rallied to the three-year high before reversing from 2.417% the previous day. The softer yields help the S& 500 Futures to print mild gains around 4,450 but Nikkei 225 tracks Wall Street’s losses to mark a 1.25% daily loss by the press time.
Looking for the catalysts, the negatives include the UK and the US readiness for more help to Ukraine even as Russia hands over a list of diplomats termed as ‘persona non grata’ to the US embassy. Further, US Senator John Cornyn recently said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions. The news becomes more worrisome ahead of Biden’s meeting with the North Atlantic Treaty Organization (NATO) friends. On the other hand, Russian President Vladimir Putin has said, “Russia will seek payment in roubles for gas sold to ‘unfriendly’ countries.” It should be observed that fresh virus woes in China and Europe also weigh on the risk appetite.
Alternatively, news from the US Trade Representative’s (USTR) office surrounding the Sino-American trade pact seems to have helped the market sentiment. In the latest update, USTR mentioned that it will reinstate 352 expired product exclusions from US ‘Section 301’ tariffs on imported goods from China. These exclusions were expired in 2020.
In addition to the mixed headlines, caution ahead of the US PMIs for March and Durable Goods Orders for February also challenge the market’s mood. Forecasts suggest that the US Markit Manufacturing PMI may weaken to 56.3 from 57.3 previous readouts while the Services PMI seemed to have dropped to 56.0 from 56.5. Further, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.
To sum up, jittery markets are in fashion and volatility could increase looking forward. As a result, safe-havens may have an upper hand over the other financial assets.
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