S&P 500 Futures: Mildly bid on trade jitters, pre-ECB, US Inflation caution probe bulls

  • S&P 500 Futures consolidate weekly losses amid US-China trade headlines.
  • Anticipated G7 moves against Beijing, covid origin inquiry add barriers for optimists.
  • Confusion over US CPI is a bigger risk to markets than ECB.

S&P 500 Futures pick up bids to 4,225, up 0.15% intraday to post the first positive day of the week on early Thursday. The risk barometer recently reacted to the news favoring the US-China trade and investment ties. However, the market’s anxiety ahead of the ECB meeting and the US Consumer Price Index (CPI) data for May keeps a tab on the risk-on mood.

As per the latest statement from China Commerce Ministry, per Reuters, “Both sides (the US and China) recognize the importance of business exchanges and will keep lines of communication open.”

The news offers an intermediate bounce to the market sentiment that was initially weighed down by downbeat concerns over the US-UK-led push to reopen investigations on the coronavirus (COVID-19) origins. On the same line was the Financial Times (FT) news mentioning, “(US) President Biden rallies allies to take a tougher stance on China.” It’s worth noting that the US law to compete with China signals extra negatives for the market sentiment.

Above all, investors’ fears ahead of the key US CPI data, the early signal for next week’s Federal Open Market Committee (FOMC) meeting, keep the risk appetite sour.

On the contrary, the Group of Seven (G7) leaders’ readiness to tackle covid by December 2022, per the leaked communiqué unveiled by Bloomberg, battles the bears. Furthermore, the hopes of extra stimulus from the US and chatters over unlock in the West are additional positive for the markets to consider.

Against this backdrop, the US 10-year Treasury yield remains on the back foot near a three-month low of 1.48%, tested the previous day, whereas the US dollar index (DXY) benefits from the safe-haven bids around 90.17, up 0.05% intraday.

Read: Wall Street Close: All three benchmarks post mild losses as inflation anxiety escalates

Looking forward, Brexit headlines and the ECB’s economic outlook can offer intermediate moves to the markets ahead of the key US inflation gauge. Forecasts suggest the key reading, Core CPI, to jump to 3.4% versus 3.0% YoY while the CPI may rise to 4.7% from 4.2% on the same timeframe.

Considering the already priced inflation run-up, a strong beat to the market consensus becomes necessary to propel the risk-off mood.

Read: US CPI May Preview: Inflation angst is coming

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