S&P500 Futures fade week-start rebound, yields dribble amid mixed inflation concerns, light calendar

• Market sentiment remains cautiously optimistic despite the latest inaction.
• S&P500 Futures seek fresh clues to extend Monday’s rebound from one-week low.
• US Treasury bond yields consolidate the previous week’s rally amid downbeat inflation expectations, employment data.
• Hawkish Fed talks, US-China jitters are extra filters probing the momentum traders seeking fresh clues.

The risk profile appears unclear on early Tuesday, despite the likely cautious optimism, as market players struggle for fresh impulse amid a light calendar and a lack of major macros. Even so, the previous day’s downbeat clues about the US and China inflation join the last week’s downbeat US employment data to underpin the riskier assets.

Amid these plays, the S&P500 Futures seesaw around 4,445, up 0.05% intraday, while struggling to extend the previous day’s recovery from the lowest level since June 29. That said, the US Treasury bond yields remain pressured after reversing from the highest level since March on Monday. It should be noted that the benchmark US 10-year Treasury bond yields printed the first daily loss in July the previous day whereas the two-year counterpart declined for the second consecutive day, to respectively near 4.00% and 4.86%.

Additionally, the Asia-Pacific shares edge higher whereas the US Dollar Index drops to the fresh low in two months to around 101.85 at the latest, down for the fourth consecutive day as we write. Even so, the prices of Gold and Crude Oil remain dicey near $1,925 and $73.20 at the latest.

On Monday, the downbeat US inflation clues, as per the New York Federal Reserve’s (Fed) monthly inflation expectations survey, followed Friday’s disappointment from the headline US job numbers to push back the hawkish Fed concerns and drown the US Dollar. It should be observed that the latest US employment report for June marked a negative surprise and offered a big blow to the US Dollar, making it post the biggest daily loss in three weeks on Friday. However, the markets still expect a 0.25% rate hike in July and hence the risk-on mood appears elusive.

Additionally probing the traders was Monday’s softer prints of China inflation data that flagged fears of deflation in the world’s biggest industrial player. Furthermore, the US-China tension is also increasing and prods the market sentiment but the news of China’s additional stimulus for the real estate front at home seems to push back the bears.

Looking ahead, the UK job numbers and the second-tier sentiment figures from Germany may entertain the market players ahead of the key US Consumer Price Index (CPI), up for publishing on Wednesday.

Also read: Forex Today: Dollar slides further with focus on inflation data