Treasury yields stay pressured, stock futures dwindle amid anxiety ahead of US PCE Inflation

• Market sentiment dwindles as fears of inflation, recession battle hopes of stimulus from China, pre-data caution.
• S&P 500 Futures, US 10-year Treasury yields print mild losses, Euro Stoxx 50 Futures remain indecisive.
• Light calendar ahead of US PCE Inflation weighs on market mood.
• ECB’s de Coz hints at the July rate hike, Japan’s Kishida rejects rate hike concerns.

Risk appetite remains sluggish during early Friday in Europe as market players struggle for fresh impulses. Also challenging the sentiment could be the anxiety ahead of the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index.

While portraying the mood, the S&P 500 Futures drops 0.20% intraday and the US 10-year Treasury yields decline 1.7 basis points (bps) to 2.741%. However, the Euro Stoxx 50 Futures register an advance of 0.15% intraday by the press time.

It’s worth noting that the recent comments from the European Central Bank (ECB) Governing Council member and Spanish central bank chief Pablo Hernandez de Cos seem to have favored European equity futures. The policymaker said, “Inflation will gradually slow down towards the 2% goal,” while also mentioning, “The process of increasing rates should be gradual.”

Elsewhere, softer US data weighed on the US dollar as market participants welcomed the lack of uncertainty over the Fed’s next move with zeal, showing confidence in the 50 bps rate hikes during the next two meetings.  That said, the US preliminary Q1 2022 Annualized GDP eased to -1.5%, below -1.4% prior and -1.3% forecasts, whereas the Pending Home Sales slumped in April, to -3.9% versus -2.0% forecast.

It’s worth noting that the Japanese policymakers’ defense of the easy money policies seemed to have helped equities as well.

Alternatively, the latest news from Bloomberg saying, “The US plans economic talks with Taiwan in latest challenge to China,” seems to challenge the sentiment. On the same line are the fears of global economic slowdown, mainly due to covid-led lockdown in China and the Russia-Ukraine crisis.

It’s worth noting that the market players keep their eyes on the US PCE inflation data, expected at 4.9% YoY versus 5.2% prior, for clear directions. Also important will be the Fedspeak and the geopolitical headlines concerning China and Russia.