S&P 500 Futures portray risk-off mood even as yields seesaw at weekly top after a jump

The market’s risk appetite remains downbeat on early Wednesday even as the bears take a breather ahead of the key US ISM Services PMI. The reason could be linked to downbeat concerns about China and fears of hawkish Federal Reserve (Fed) moves, not to forget Eurozone recession woes.

While portraying the mood, S&P 500 Futures print mild losses after a downbeat Wall Street close, lacking moves around the 4,500 threshold by the press time. On the same line, the benchmark US 10-year Treasury bond yields remain sidelined near 4.26% after rising eight basis points (bps) the previous day.

Elsewhere, the US Dollar Index (DXY) seesaws at the highest level since March 15, dicey near 104.80 at the latest, while prices of Gold and WTI Crude Oil tread water around $1,925 and $86.40 as we write.

It should be noted that growing fears of China recession and Eurozone economic slowdown weigh on the market sentiment while the mostly firmer US data and hawkish comments from the Federal Reserve (Fed) officials seem to underpin the risk aversion of late. On the same line could be the concerns about the US-China diplomatic tussles.

On Tuesday, China's Caixin Services Purchasing Managers' Index (PMI) for August dropped to the lowest level of the year with 51.8 figures versus 54.1 prior.

With this, the market’s lack of confidence in the Chinese measures to defend the economy joins the US businesses’ discomfort in Beijing to challenge the market sentiment.

Alternatively, China recently announced a slew of quantitative and qualitative measures to defend the economy from losing the post-COVID-19 recovery but has gained a little positive response from the market. Also pushing back the bears was the news suggesting the ability to avoid default by China’s biggest reality player Country Garden.

Earlier in the day, US Commerce Secretary Gina Raimondo defended the current US tariffs on China until the four-year review is complete, which in turn joins the Taiwan concerns to highlight the Sino-American tension.

On a different page, the US Factory Orders for July dropped to the lowest since mid-2020 while posting -2.1% MoM figures versus -0.1% expectations and 2.3% previous growth. However, the orders excluding transport rose 0.8% MoM, Shipments of goods stayed firmer and inventories marked the first increase in three months.

Also, Federal Reserve (Fed) Governor Christopher Waller signaled during a CNBC interview that data will drive whether the Fed needs to lift rates again, as well as confirm whether the Fed is done raising rates. The policymaker also added, "Data is looking good for soft landing scenario,” which in turn defends the Fed’s preference for “higher for longer” rates and weighs on the sentiment.

Looking ahead, the US ISM Services PMI for August, the Bank of Canada (BoC) Interest Rate Decision and Eurozone Retail Sales for July will decorate the calendar. However, major attention will be given to the risk catalysts for clear directions.

Also read: Forex Today: US Dollar jumps, Oil soars and Gold tumbles; Australia GDP next