US T-bond yields, S&P 500 Futures print mild gains amid cautious optimism

• US 10-year Treasury yields reverse pullback from two-year high, S&P 500 Futures print snap three-day downtrend.
• Mixed trade, geopolitical concerns join a light calendar to overcome recent market fears led by major central banks.
• US inflation data will be crucial, risk catalysts, US trade numbers may entertain intraday traders.

Market sentiment turns cautiously optimistic during Tuesday’s Asian session, following the risk-off week.

The latest improvement in the mood could be linked to the slightly easy tone of Russian President Vladimir Putin and positive trade developments between the US and Japan. On the same line is the recent print of the US inflation expectations, per the 10-year, breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, which in turn challenges Fed hawks and recede fears of faster contraction of the easy money policies.

Alternatively, the harsh tone of the political leaders from the US and the UK keeps the risk of a Russia-Ukraine war on the table, which in turn challenges the risk appetite. Additionally, worsening covid woes in Japan and Hong Kong, not to forget the US-China trade tussles, challenge the market optimism.

“Hong Kong Chief Executive Carrie Lam is set to discuss further restrictions at an Executive Council meeting on Tuesday after a record number of new coronavirus infections were reported, with cases doubling every three days,” said Bloomberg. On the other hand, Japan’s Tokyo is up for extending the virus-led quasi-emergency towards early March amid record daily infections.

It’s worth noting that China’s return from a week-long holiday, coupled with a readiness to infuse markets at home and battle the hawkish major central banks, added to the risk-on mood.

Amid these plays, the US 10-year Treasury yields rose 1.6 basis points to 1.93%, close to the highest levels since late 2020, while the US stock future print mild gains around 4,485 at the latest. That said, the benchmark US T-bond coupons eased from a two-year high the previous day while Wall Street marked sluggish closing. Additionally, stocks in the Asia-Pacific region also grind higher to portray slightly positive market sentiment.

Looking forward, risk catalysts may entertain market players ahead of the US Goods and Services Trade Balance for December, expected $-83B versus $-80.2B. However, major attention will be given to Thursday’s key US Consumer Price Index (CPI).

Read: Do not expect volatility to ease as US CPI is due this week