US 10-year Treasury yields, S&P 500 Futures portray cautious optimism

• US 10-year Treasury yields consolidate the previous day’s heavy fall.
• S&P 500 Futures print mild gains despite Wall Street’s second consecutive clear loss.
• US President Joe Biden’s six-pronged strategy, UK vaccine approval keep buyers hopeful after ECB and virus-led disappointment.
• A light calendar challenges market moves but risk catalysts are the key.

Market sentiment improved during early Friday after a few dismal days, mainly due to the economic fears and tapering concerns.

While portraying the mood, the US 10-year Treasury yields regain a 1.30% level after dropping over four basis points (bps) the previous day. On the same line, S&P 500 Futures also ignore Wall Street benchmarks while printing 0.08% intraday gains to 4,495 at the latest.

US President Joe Biden unveiled details of his battle plan to overcome the pandemic during early Friday in Asia. While his main emphasis was on the faster vaccinations and push for masks, comments like “we can and we will turn the tide on COVID-19,” favored the bulls.

On the contrary were headlines from the Australian Financial Review (AFR) signaled that Canberra is considering terminating the agreement with China on a 99-year lease on the Port of Darwin. Further, China President Xi Jinping’s no gilt in regulatory crackdown over IT companies and COVID-19 fears in the Asia–Pacific chain the optimism.

That said, all three key US equity indices, namely the Dow Jones Industrial Average (DJI), S&P 500 and Nasdaq, dropped for the second consecutive day on Thursday on pessimism surrounding the economic recovery being challenged by the Delta covid variant. Also weighing on the mood could be the headlines concerning the US Federal Reserve (Fed) officials’ push for tapering.

It should be noted, however, that Reuters news saying that UK’s Medicines and Healthcare products Regulatory Agency (MHRA) approved Pfizer and AstraZeneca's COVID-19 vaccine to be used as booster shots battled the bears. Also on the positive side was the reduction in the weekly US Jobless Claims, from 335K expected to 310K for the week ended on September 03.

Furthermore, the European Central Bank (ECB) left its rates unchanged, with the main refinancing rate 0.00%, as widely expected, while lowering the pace of the Pandemic Emergency Purchase Program (PEPP), at €1,850 billion until at least March 2022, terming it as “recalibration” rather than “tapering”.  It’s worth noting that the ECB President Christine Lagarde sounded cautiously optimistic but failed to entertain the markets.

Looking forward, global markets may remain quiet ahead of the weekend amid a light calendar and a passage of the ECB. The same may allow the consolidation moves.