US Treasury yields, S&P 500 Futures keenly await inflation signals

• US 10-year Treasury yields seesaw after snapping three-day uptrend, S&P 500 Futures print mild gains.
• Omicron, China and geopolitics are all active catalysts but markets care for Fed rate hikes.
• Inflation expectations ease ahead of US CPI, Michigan Consumer Sentiment Index.

Global markets portray the typical pre-data anxiety during early Friday as traders await the key US data amid increasing chatters over the hawkish Fed actions.

While portraying the mood, the US 10-year bond coupon remains sidelined around 1.49% after reversing from a two-week top the previous day. Also showcasing the subdued markets is the 0.14 intraday gain of the S&P 500 Futures, as well as mixed performance of the Asia-Pacific stocks.

Having witnessed a slump in the US Initial Jobless Claims, global banks seem to turn more hawkish for the next week’s US Federal Reserve (Fed) monetary policy meeting. Among the hawks are the leading US banks including Goldman Sachs, Citibank, JP Morgan and Morgan Stanley. Also favoring the bulls are the latest shifts in the Fed Funds Futures suggesting sooner rate hikes.

On the contrary, the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, snap a four-day recovery from early October lows while easing to 2.47% for Thursday, challenging the Fed hawks.

Elsewhere, chatters surrounding looming defaults of China’s Evergrande and Kaisa join the Sino-American tension to add to the risk catalysts. Further, the US support to Ukraine in a tussle with Russia and the Washington-Israel talks to convey Tehran’s diplomacy also weigh on the risk appetite.

However, increasing hopes that the South African covid variant, dubbed as Omicron, is less severe than the previous strains and the present booster shots of the vaccines are effective against the same keeps the investors hopeful.

That said, prices of commodities like gold, silver and crude oil recover but the US Dollar Index (DXY) remains lackluster of late.

Given the scheduled release of the US Consumer Price Index (CPI) and the preliminary reading of the Michigan Consumer Sentiment Index for November and December respectively, markets will remain sidelined ahead of releases. However, a negative surprise should boost market sentiment and equities but not the greenback.

Read: US Consumer Price Index November Preview: Inflation is the new cause celebre