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S&P 500 Futures drop towards 3,600 as yields rise on full markets’ return

  • Market sentiment turns sour as traders from Japan, the US and Cana return from holidays.
  • S&P 500 Futures prints five-day downtrend, US Treasury yields stay firmer.
  • Geopolitical fears, hawkish Fed bets weigh on risk appetite ahead of the top-tier data/events.
  • Risk aversion is likely to prevail considering the gloomy global economic outlook.

The return of full markets magnifies the risk-off mood during Tuesday’s Asian session. The reason could be linked to the stronger hawkish bias of the Fed amid the broad recession woes. Also weighing on the sentiment could be the geopolitical fears surrounding Russia and China.

While portraying the mood, the S&P 500 Futures reverses the early Asian session gains and renews the intraday low near 3,620 during the five-day downtrend. Further, the US 10-year Treasury yields remain firmer around 3.96% while its two-year counterpart snaps a four-day uptrend near 4.31% at the latest.

That said, Russia’s intense shelling on Kyiv, in reaction to the Crimean bridge explosion, appeared to have drowned the sentiment of late. On the same line could be the fears that the US and China could again be at loggerheads amid looming concerns surrounding Taiwan and South Korea.

Elsewhere, the CME’s FedWatch Tool signals 78.4% chance of the Fed’s 75 bps rate hike in November, which in turn weigh on the mood. The reason could be linked to Friday’s upbeat US jobs report and the recently hawkish comments from the Fed policymakers.

“US can lower inflation relatively quickly without recession or large increase in unemployment,” said Chicago Fed President Charles Evans on Monday. The policymaker also added that the Fed needs to "carefully and judiciously" navigate to a "reasonably restrictive" policy rate. It should be noted that Federal Reserve Vice Chair Lael Brainard made the case for cautious rate hikes for the future, per the Wall Street Journal (WSJ).

It should be noted that the UK’s political concerns and downbeat economics from the Eurozone also amplify the markets’ pessimism, which in turn joins the firmer yields to underpin the US Dollar Index (DXY)  and exert downside pressure on commodities, as well as the Antipodeans.

Moving on, Fed Minutes and the US Consumer Price Index (CPI), up for publishing on Wednesday and Thursday, appear as the week’s key events and shouldn’t be missed. Also important are the headlines surrounding Russia and China.

Also read: Forex Today: Dollar keeps rallying on fear

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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