S&P 500 Futures retreat despite Wall Street’s gains, yields seesaw as pre-Inflation anxiety escalates

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  • Risk profile appears unclear as traders await key inflation clues from Europe, US.
  • Key central bank officials show readiness to act while sounding less hawkish.
  • Fears emanating from China, Russia and North Korea weigh on sentiment amid a light calendar in Asia.
  • Second-tier US data, German HICP eyed for intraday directions.

Having witnessed a mixed end to Wednesday, market sentiment remains sluggish during early Thursday, titling towards the bears of late.

While portraying the mood, the S&P 500 Futures print mild losses around 4,050, retreating from a one-week high marked the previous day, while ignoring Wall Street’s upbeat performance. On the other hand, the US 10-year and two-year Treasury bond yields grind higher after teasing the bond buyers the previous day. That said, US 10-year and two-year Treasury yields marked their first daily loss in three on Wednesday by ending the North American trading session around 3.57% and 4.10% respectively, making rounds to the same level by the press time.

Behind the stage could be the latest comments from the officials from the Federal Reserve (Fed), European Central Bank (ECB), Bank of England (BoE) and Bank of Canada (BoC) gain major attention as most of them raise doubts on further rate hikes despite sounding hawkish. Also testing the market’s previous risk-on mood are the talks of easing inflation pain and geopolitical woes, not to forget anxiety ahead of this week’s key data.

Starting with Fed Chair Jerome Powell who showed forecasts for one more rate hike in 2023, which in turn pushed back talks of policy pivot and favor the US Dollar bulls. Though, Vice Chair for Supervision Michael Barr said, “We will be looking at incoming data and financial conditions to make a meeting-by-meeting judgment on rates.”

Further, Bank of England (BoE) Governor Andrew Bailey showed readiness for more rate hikes but BOE policymaker Catherine Mann flagged challenges for the UK’s central bank to do its job in the second half of the year, suggesting more hurdles for the hawks moving forward.

On the same line, BoC Deputy Governor Toni Gravelle said on Wednesday that the BOC is ready to act in the case of severe market-wide stress and provide liquidity support to the financial system.

Additionally, ECB Policymaker Isabel Schnabel said on Wednesday that underlying inflation in the Eurozone is proving sticky and hence defends the peers’ hawkish bias.

It should be observed that optimism surrounding the technology and banking sector allows the market players to remain hopeful ahead of the top-tier Europe and US inflation numbers.

Meanwhile, the nuclear threats from Russia and North Korea join the US-China tussles to also weigh on the risk profile amid a light calendar in Asia.

Looking forward, preliminary readings of the Harmonized Index of Consumer Prices (HICP) gauge for Germany and the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) details will be important to watch for market players. However, major attention should be given to the banking and inflation clues.

Also read: Forex Today: DXY recovers despite risk appetite; focus turns to inflation data