S&P 500 Futures, US Treasury bond yields drop on China news, US inflation, Fed Minutes in focus

• Market sentiment sours China-induced fears even as Easter Monday holiday restricts momentum.
• S&P 500 Futures snap two-day recovery, yields defend previous weekly loss.
• Recession woes, central bank bets and inflation data are important for near-term directions.

Risk appetite remains unclear as the thin presence of traders due to the Easter Monday holiday joins the risk-negative headlines from China, as well as the cautious mood ahead of the key US data/events.

Taiwan President Tsai Ing-wen’s US visit triggered a fresh bout of US-China woes as Beijing conducts strong military drills near Taiwan Strait. “China's military simulated precision strikes against Taiwan in a second day of drills around the island on Sunday, with the island's defense ministry reporting multiple air force sorties and that it was monitoring China's missile forces,” reported Reuters.

It’s worth noting that Russia and North Korea’s warnings to use nuclear weapons are extra catalysts contributing to the risk-off mood.

On the same line are fears of global recession, inflicted by the US, amid downbeat US data and easing global hawkish talks.

Friday’s mixed US employment report, despite firmer Nonfarm Payrolls (NFP), failed to resettle the market’s risk-on mood even if the Fed bets improved and now suggest a 0.25% rate hike in May. The reason could be linked to the market expectations suggesting a rate cut in late 2023, per the Fed Fund Futures.

Elsewhere, central bankers from Australia and Canada have recently announced a pause in their rate hikes and favored economic woes.

Amid these plays, S&P 500 Futures print mild losses around 4,132 while snapping a two-day uptrend whereas the US 10-year and two-year Treasury bond yields remain pressured near 3.37% and 3.95% respectively. In doing so, the benchmark bond coupons extend the previous day’s losses and portray the market’s rush toward the risk-safety amid economic slowdown fears.

It should be noted that the US Dollar Index (DXY) licks its wounds around a two-month low while the WTI crude oil rises to $80.80 by the press time. Further, Gold price slides below $2,000 as traders pare recent gains at the 13-month high.

Moving ahead, the Easter Monday holiday can restrict the market’s intraday moves. However, updates from the US Consumer Price Index (CPI) data and the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting Minutes will be crucial for near-term directions as riskier assets seem losing their charm. It’s worth mentioning that the start of earnings season will also be important for traders to watch amid recession woes.

Also read: Forex Today: After NFP, attention turns to US inflation and global growth concerns