- Market sentiment remains sour as inflation woes join grim geopolitical catalysts.
- S&P 500 Futures extend Wednesday’s pullback from two-week high.
- US 10-year Treasury yields refresh 14-year high, 2-year bond coupons rally to the highest since 2007.
- Risk catalysts, Fedspeak is key to watch amid growing market fears.
Risk-aversion remains on the table during early Thursday, after returning from a previous day's break, amid fears of higher inflation and central bankers’ aggression recalling the economic slowdown. Also weighing on the mood could be the risk-negative headlines from China and Russia.
While portraying the mood, the S&P 500 Futures dropped 0.60% intraday as bears attacked the 3,685 level after reversing from a fortnight top the previous day. It’s worth noting that Wall Street snapped a two-day uptrend on Wednesday amid the risk-off mood.
Elsewhere, US 10-year Treasury yields refresh a 14-year high above 4.0%, around 4.14% by the press time, while its two-year counterpart stays strong near the highest level since 2007, up 0.30% intraday near 4.57% at the latest.
The sour sentiment could be the broadly firmer inflation numbers from Britain, Eurozone and Canada, as well as the hawkish Fed bets and pessimism conveyed by the Fed’s Beige Book.
As per the CME’s FedWatch Tool, markets price in around a 95% chance of the Fed’s 75 bps rate hike in November. The hawkish Fed wagers seem to justify the upbeat comments from the Federal Reserve (Fed) policymakers and raise fears of economic slowdown.
Recently, Chicago Fed President Charles Evans said that (they) need to ensure inflation pressures don't broaden further, suggesting more rate hikes despite the recession woes. It should be noted that the Fed’s Beige Book added to the market’s fears by showing increased pessimism among the respondents.
It should be noted that China’s covid conditions, Russia’s aggression in the fight with Ukraine, and the recent Sino-American tensions over Taiwan seem to act as an additional challenge for the market players.
That said, fears of a recession could keep the risk-aversion intact amid a light calendar, propelling the US dollar’s safe-haven demand while challenging the prices of commodities and Antipodeans.
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