SP 500 wobbles after rebounding from 21-month low, yields climb back toward multi-year high

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  • Market sentiment remains weak after a day of volatility.
  • US stock futures and Asia-Pacific stocks trade mixed, yields regain bullish momentum.
  • News around China and hawkish central banks keep investors hopeful amid doubts about the BoE’s actions.
  • German inflation and US GDP data could entertain traders, but risk aversion is likely to prevail.

Global markets fade previous day’s optimism as traders await new clues to believe in the cautious optimism of policymakers during the early hours of Thursday.

While portraying the mood, 10-year US Treasury bond yields snap biggest daily loss in six months and allow the DXY US dollar index to jump back towards the 20-year high marked the previous day. Notably SP500 futures suffer slight losses as they struggle to sustain the bounce from the 21-month low.

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Recently, Chinese Vice Foreign Minister Ma Zhouxu said, according to Reuters: “We Chinese are not going to capitulate. We will not sit idly by while the interests of our country are harmed“, which suggests that there will be more clashes between China and the United States.

Also from China was news that the People’s Bank of China (PBoC) raised its peg on the yuan for the first time in nine days and plans to issue 2.5 trillion yuan of government bonds in the fourth quarter.

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On the other hand, the doubts of the markets about the capacity of the Bank of England (BoE) to reset British economic data, maintaining the recently criticized fiscal plan, weigh on sentiment. Also, Hard-line comments from global central bankers, including those in Europe and the US, join Europe’s looming energy crisis and Russia’s dithering when it comes to respecting western pressure to put additional downward pressure on major currency pairs.

That said, traders are awaiting headline inflation data from Germany, specifically the Harmonized Index of Consumer Prices (HICP), to determine immediate market moves amid bullish expectations from the release, expected by 10.0% year-on-year compared to 8.8% previously. Next, the US second quarter gross domestic product (GDP) readings, which are expected to confirm an annualized figure of -0.6%, will be important for investors.

Source: Fx Street

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