S&P 500 Futures, yields grind higher as policymakers tame fears of banking crisis

The risk profile remains firmer during early Tuesday as global policymakers remain optimistic about overcoming the banking crisis. Adding strength to the risk-on mood could be a lack of hawkish comments from the Federal Reserve (Fed) officials and mixed US data. It should be noted, however, that the latest geopolitical fears emanating from Russia, China and North Korea seem to challenge the optimists.

While portraying the mood, S&P 500 Futures print mild gains around 4,010 during the four-day uptrend whereas the US Treasury bond yields remain sidelined after snapping a three-day downtrend on Monday. It’s worth noting that the US 10-year and two-year Treasury yields grind higher around 3.53% and 3.93% by the press time.

Among the key headlines were the United States and European policymakers’ stretching of emergency credit lines to the troubled banks, as well as announcements of deposit insurance schemes. Recently adding strength to the risk-on mood were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

US Treasury Department recently said that the US will keep using tools to prevent banking contagion as needed. Previously, Federal Reserve Governor Philip Jefferson said, “Inflation ‘has started to come down’ with some of that due to tighter monetary policy and some due to other factors such as improving global supply chains.” On the same line were comments from Federal Reserve Vice Chair for Supervision Michael Barr who said that they are prepared to use all of our tools for any size institution as needed to keep the system safe.

Not only the US officials but a show of readiness to act by the European Central Bank (ECB) and the Bank of England (BoE) policymakers, as well as Australia’s Assistant Treasurer and Minister for Financial Services Stephen Jones, also underpin the market’s optimism.

Furthermore, softer US data weighing on the hawkish Fed bets after talks of US recession, previously teased by Minneapolis Fed President Neel Kashkari, also allow the traders to remain hopeful and weigh on the US Dollar while allowing the Gold price to grind higher. On Monday, the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

Alternatively, the geopolitical fears surrounding China and Russia challenge the market’s upbeat sentiment. That said, talks about China’s failure to keep the pace of growth promised, as well as Russia’s alleged readiness to use nuclear weapons against Ukraine. On the same line are the latest comments from North Korean Leader Kim Jong Un who recently stated, per KCNA news, “(They) should be fully ready to use nuclear weapons at any time.”

Moving forward, the US Conference Board’s (CB) Consumer Confidence for March, as well as the second-tier housing and activity data, can direct intraday moves. However, major attention will be given to Friday’s Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index.

Also read: US Consumer Confidence Preview: No good news for Americans