S&P 500 Futures rise half a percent as Ukraine, Venezuela tame market tensions

• S&P 500 Futures reverse from two-week low to snap four-day downtrend.
• US Treasury yields ease, Asia-Pacific stocks also print mild gains on cautious optimism.
• Ukraine dumps NATO plan, Venezuela releases American prisoner.

After multiple days of pessimism, mainly due to the Ukraine-Russia tussles, market sentiment improves during early Wednesday.

While portraying the mood, the US 10-year Treasury yields drop two basis points (bps) to 1.85% whereas the S&P 500 Futures rise 0.40% on a day at the latest. Also suggesting the upbeat risk appetite is the US Dollar Index’s (DXY) extended pullback from 22-month, as well as firmer equities in Asia. It should be noted that prices of gold retreat from the highest levels since August 2020 as traders trim the metal’s safe-haven demand.

Ukraine’s retreat from the previous plan to join NATO became the major risk-on catalyst the previous day. The news also joins the confirmation of the first humanitarian corridor in Kyiv to challenge the previous risk-off mood. Additionally favoring the sentiment is Venezuela’s freeing of the American prisoner and the US hint of easing sanctions afterward.

Even so, Russia may not cheer Kyiv’s intention to dump NATO membership on fears of joining the European Union (EU). The same demolishes President Vladimir Putin’s unsaid target of putting Kremlin-controlled leader in Ukraine and can keep the fears of further geopolitical tension on the table. Recently, Russia called for nationalizing foreign-owned factories that shut operations, which in turn raised doubt on the market’s optimism.

Elsewhere, the US trade deficit rallied to a record high and the small business confidence, as signaled by IBD/TIPP Economic Optimism gauge for March, dropped to the lowest in 13 months. Further, China’s Consumer Price Index (CPI) rose past 0.8% forecast to reprint 0.9% prior figures while the Producer Price Index (PPI) crossed 8.7% market consensus with an 8.8% YoY level, versus 9.1% previous readouts.

Overall, the market players have finally got a reason to consolidate the latest moves and hence the risk-on may last longer until any major negatives erupt from Moscow. Also important to watch will be Thursday’s US inflation data amid the Fed’s indecision over 0.50% rate hike in March.