S&P 500 futures rebound in sync with US Treasury yields, gold corrects - Risk reset?

Markets are seeing a bit of a risk recovery after Monday’s blood bath across the financial markets, as the fast-spreading coronavirus reared its ugly head outside China, in Italy, South Korea and Iran and prompted a massive flight to safety. Italy reported 7 deaths while the government moved to quarantine at least 10 towns. 

So far this Tuesday, the US equity index futures are on a road to recovery along with the US Treasury yields. Gold is extending its correction from a seven-year high despite the losses in the Asian equity markets, as the latest data from China showed that the number of new coronavirus cases picked up pace just as the death toll decreased.

At press time, the futures on the S&P 500 are up 0.86% or 28 points, while Australia's ASX 200 and Japan’s Nikkei 225 are shedding 1.18% and 3.05%, respectively. South Korea's Kospi, however, rebounds 0.70% while the Shanghai Composite Index loses nearly 1%.  

Gold is currently trading at $1,655 per Oz, reporting a 0.3% loss on the day, having hit a seven-year high of $1,689.40 a day before. Meanwhile, the US benchmark 10-year Treasury yields are jumping nearly 2% to trade at 1.402%. The 10-year rate on the US Treasuries fell 11 basis points to 1.37%, almost within touching distance of the historic low of 1.32% it reached in 2016 after the UK’s Brexit vote.

Oil prices are on a tepid recovery after diving 5% on Monday, in response to rising oil demand concerns amid coronavirus contagion.

Within the currency markets, most majors are on a recovery or profit-taking spree after the sell-off, as the US dollar eases from multi-year tops across its major peers.

USD/JPY gains 0.20% to trade just shy of the 111 level while AUD/USD looks to close Monday’s bearish opening gap near 0.6722, up 0.28% so far. The Kiwi also jumps in tandem and regains the 0.6350 level. The Chinese yuan is up 0.25% vs. the greenback, hovering around 7.0111, at the time of writing.

Among the European currencies, EUR/USD is seen extending gains above the 1.0850 barrier while Cable trades better bid above 1.2900.