US Treasury yields pare NFP-led gains at 25-month high, stock futures stay pressured

• US T-bond yields struggle to extend Friday’s run-up around multi-day top, stock futures remain on the back foot.
• China’s return from week-long holidays fails to entertain markets amid mixed concerns over Fed’s next moves, light calendar.
• US CPI will be crucial for the weak as inflation expectations test Fed hawks.
• Geopolitical tensions surrounding Russia add strength to sluggish sentiment.

Global markets portray a sluggish start to the week, after a volatile one, during early Monday as traders await fresh clues to confirm recent hawkish bias for the key central banks. Also challenging the trading sentiment is China’s downbeat data that dashed hopes of a warm welcome to Beijing –based traders as they return from one-week-long Lunar New Year break.

While portraying the mood, the US 10-year Treasury yields snap two-day run-up to ease from the highest levels since January to 1.91% at the latest. On the same line were stock futures from the US and Europe. Additionally, Asia-Pacific equities remain mixed with gains in China and New Zealand struggle to convince bulls.

Mixed concerns over the inflation and the Fed’s next move in March become the key hurdle for the US Treasury yields. Although upbeat US jobs report propelled bond coupons to the fresh multi-day high on Friday, indecisive figures of inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, tested bulls afterward.

As per the latest US jobs report, the headline Nonfarm Payrolls (NFP) rose by 467K versus the median forecast for a 150K rise and 510K revised prior while the Unemployment Rate rose to 4.0% from 3.9% in December, compared to expectations for a no-change figure. It’s worth noting, however, that the U6 Underemployment Rate extended the south-run to 7.1% from 7.3% previous readouts. Also encouraging was Average Hourly Earnings that jumped strongly to 5.7% versus 4.9%. 

On the other hand, the US inflation expectations remain sluggish around 2.41% while fading the bounce off the lowest levels since late September marked the last week.

It should be noted that China’s downbeat Caixin Services PMI and growing concerns over Russia’s war with Ukraine also weigh on the market sentiment amid a slower start to the week.

Moving on, US Consumer Price Index (CPI) for January will be the week’s important data as hot inflation should propel the yields and the US dollar, which in turn can weigh on commodities and Antipodeans.

Read: Wall Street sags as Americans turn focus to real-world problems