S&P 500 Futures and US Treasury yields portray mild risk-on sentiment

• S&P 500 Futures part ways from Wall Street’s mild losses, US Treasuries register small gains.
• Fears of US-China tussle, downbeat US data weighed on the risk-tone sentiment earlier, hopes of economic restart seem to help off-late.
• Traders’ caution ahead of the key US GDP, FOMC also plays its role.

While S&P 500 Futures defy Wall Street’s mild losses with 0.30% gains to 2,875, small gains of the US 10-year Treasury yields, up 0.6 basis point to 0.616%, portrays a mild risk-on sentiment during the early Asian session on Wednesday.

Market’s risk-tone earlier struggled amid mixed messages concerning the European, Pacific and the US economies’ restart and a tussle between the US and China.

Having witnessed further flattening of the coronavirus (COVID-19) curve, the US, Europe and the Pacific nations are recently signaling how they will roll back the lockdown restrictions. This offers a sigh of relief to the global traders after more than a month of economic pause.

However, the US allegation on China, for the spread of the deadly virus, seems to ignite a fresh US-China trade war and keeps the trade sentiment pressured.

Also weighing on the markets were downbeat US economics ranging from multi-year low consumer confidence figures to negative manufacturing gauge.

It’s worth mentioning that the recent risk-on sentiment is also pressured due to the market’s wait for the key US GDP and FOMC data. “After +2.1% in Q4, the median forecast for Q1 is -4% annualized (i.e. -1%qtr) but with a wide range of estimates. The +/- 1 standard deviation in the Bloomberg survey is -6% to -2.1%. With the fed funds rate midpoint at the effective lower bound of 0.125%, QE open-ended and some new special facilities to ease market strains not even operational yet, no notable policy change is anticipated. Chair Powell will then hold the post-FOMC meeting press conference at 4:30 am AEST. He is likely to be asked about possible next steps such as extended forward guidance and yield curve control, along with a likely dismissal of the idea of negative interest rates,” said Westpac.