|

US Treasury yields remain pressured, S&P 500 Futures drop half a percent on sour sentiment

  • US 10-year Treasury yields seesaw around fortnight low.
  • S&P 500 Futures drop 0.60%, Asia-Pacific shares trade mixed.
  • PBOC announced rate cut, Omicron fears escalate ahead of holiday season.
  • Fed’s Waller renewed rate-hike calls, US Senator Manchin poured cold water on the face of BBB hopes.

Having witnessed a roller-coaster week filled with the central bankers’ actions, global markets stay depressed during early Monday.

While portraying the mood, US 10-year Treasury yields dropped 1.5 basis points (bps) to 1.38%, down for the third consecutive day while S&P 500 Futures drop 0.60% at the latest. Further, Australia’s ASX 200 dropped 0.30% by the press time even as stocks in China traded mixed.

The reason could be linked to the escalating concerns over the covid variant linked to South Africa, namely Omicron, as well as fresh fears of a Fed rate hike in early 2022. Adding to the bearish catalysts is the latest disappointment for the US Democratic Party members after Joe Manchin rejected the push to vote for President Joe Biden’s Build Back Better (BBB) stimulus.

A 52% jump in the UK’s covid cases and fears of fresh covid-linked restrictions during the Christmas celebrations join chatters over a virus-led death of a New Zealand resident who took Pfizer vaccine. Additionally, New York Times said, “Dr. Anthony S. Fauci, the nation’s top infectious disease expert, warned on Sunday that the extraordinarily contagious Omicron variant of the coronavirus was raging worldwide and that it was likely to cause another major surge in the United States, especially among the unvaccinated.”

Elsewhere, US Senator Manchin’s step back rejects odds for any fruitful discussion on the much-awaited US stimulus during 2021 as Democrats needed all the party votes to progress on the BBB. “West Virginia's Joe Manchin appeared to deal a fatal blow to President Joe Biden's signature domestic policy bill, known as Build Back Better, which also aims to expand the social safety net and tackle climate change,” said Reuters.

On the same line were fresh talks over the Fed rate hike in early 2022, triggered on Friday by Fed Board of Governors member Christopher Waller. The policymaker said, per Reuters, “The ‘whole point’ of the Fed's decision to accelerate the pace of its QE taper was to make the March Fed meeting ‘live’ for a first rate-hike.”

Against this backdrop, the US Dollar Index (DXY) struggles around 96.65, after posting the highest daily close in 2021 the previous day. The risk-aversion wave favors gold prices but weighs on the oil at the latest.

It’s worth noting that a light calendar and holiday mood may restrict market moves looking forward.

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

More from Anil Panchal
Share:

Editor's Picks

AUD/USD eyes 100-SMA hurdle near 0.7035 as hawkish RBA counters firmer USD

AUD/USD regains positive traction on Tuesday and climbs to 0.7030 during the Asian session, reversing the previous day's corrective slide from a one-month high as hawkish RBA rate expectations continue to support the Aussie. Spot prices, however, remain below the 100-day SMA pivotal resistance amid a firmer US Dollar as traders brace for Australia’s September CPI report on Wednesday ahead of the Fed rate decision.

USD/JPY sticks to modest gains above 157.50 as traders await Fed, BoJ meetings

USD/JPY attracts buyers for the third straight day, recovering further from a one-month low ahead of Wednesday’s FOMC decision and the BoJ policy update on Friday. Meanwhile, expectations that the BoJ may hold off on aggressive rate hikes weigh on the Japanese Yen, and the US Dollar advances to a nearly two-week high, supporting the currency pair.

Gold holds above $4,000 as traders brace for Fed interest rate decision

Gold edges higher during American trading hours on Tuesday after trading in negative territory earlier in the day. A slight decline in Oil prices offers some relief, although a firmer USD limits the upside as traders await the Fed’s monetary policy announcement on Wednesday.

Crypto Today: Bitcoin, Ethereum and XRP on edge as sell-side pressure intensifies

Cryptocurrency prices are broadly correcting on Tuesday, led by Bitcoin (BTC) edging lower below the pivotal $80,000 level. Ethereum (ETH) mirrors Bitcoin’s neutral-to-bearish outlook, while Ripple (XRP) hovers around $1.30.

Experts agree: Fed policy outlook and geopolitical tensions keep US Dollar bid

The US Dollar Index rallies 0.6% in three days and hits fresh two-week highs above 102.00. Investors return to the US Dollar as markets brace for a hawkish hold by the Fed on Wednesday. Waning hopes of any immediate US-Iran peace deal have provided additional support to the safe-haven USD.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.