Yields retreat, S&P 500 Futures consolidate gains with eyes on US NFP


  • US 10-year Treasury yields fade bounce off 10-week low.
  • S&P 500 Futures pare the week’s heaviest daily gains, Asia-Pacific stocks trade mixed.
  • Hawkish Fedspeak weigh on sentiment but hopes over Omicron treatment, US bill to avoid shutdown probe bond bears.
  • China-linked headlines add to the negative catalysts but nothing more important than the US NFP.

Market players stay divided during early Friday as the Fed hawks confront reflation and geopolitical concerns. Adding to the filters is the cautious mood ahead of the US Nonfarm Payrolls (NFP).

To portray the sentiment, the US 10-year Treasury yields drop 2.3 basis points (bps) to 1.426% whereas the S&P 500 Futures drop 0.50% at the latest. That said, the US bond yields recovered from the latest October levels the previous day while the Wall Street benchmarks posted the biggest daily jump in the current week.

Fed policymakers, including Federal Reserve (Fed) Bank of San Francisco President Mary Daly and Richmond President Thomas Barkin, were the most hawkish and fuelled US Treasury yields the previous day. Also helping the bond sellers were softer-than-expected prints of the US Initial and Continuing Jobless Claims for the week, as well as downbeat Challenger Job Cuts for November.

The recent optimism over finding the cure of the South African variant of the coronavirus, dubbed as Omicron, seemed to have underpinned the US stocks on Thursday.

Recently, the EU-US dislike for China and comments by Beijing’s Ambassador to the US, over phase one deal and tariffs, seem to challenge the risk appetite. Furthermore, the US policymakers’ struggle to avoid a government shutdown on Saturday probes the optimists of late. Additionally, the five Omicron cases in the US and spreading virus woes in the rest of the world also weigh on the risk appetite.

Talking about data, China’s Caixin Services PMI for November came in below 53.8 figures to 52.1 while the Composite PMI also dropped from 51.5 to 51.2 during the stated month. Before that, Australia’s PMIs were mixed for November while Japan’s Jibun Bank Manufacturing PMI came in better than previous for the stated month.

Looking forward, markets expect 550K of NFP print and an easy 4.5% Unemployment Rate, an absence of which can extend the latest weakness of the US Treasury yields and favor equities amid hopes of further easing.

Read: US Nonfarm Payrolls November Preview: Can we agree the labor market is healing?

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