S&P 500 Futures print mild gains, Treasury yields dribble amid cautious optimism ahead of US NFP

• Market sentiment remains firmer amid pre-NFP trading lull.
• S&P 500 Futures track Wall Street gains, China headlines add to the risk-on mood.
• Yields remain sidelined amid mixed concerns over Fed’s next moves.
• Earlier signals for US NFP have been downbeat, weaker readings could favor risk appetite.

Risk appetite remains upbeat, despite recent jitters, as traders await the monthly US jobs report on Friday. The risk-on mood could be linked to the recently downbeat US data and increasing hurdles for the Fed’s aggression. On the same line could be the latest headlines concerning the US-China trade situation.

While portraying the mood, the S&P 500 Futures print mild gains but the US Treasury yields pause the previous fall around 2.91%, suggesting the market’s cautious optimism. That said, the Wall Street benchmarks rose the most in a week whereas the bond coupons remained pressured on Thursday.

Comments from Deputy US Trade Representative (USTR) Sarah Bianchi seemed to have offered the latest entertainment to markets as the diplomat said, “USTR is seeking a 'strategic realignment' with China, tariff structure that 'makes sense'.” The positive mood, however, was challenged by statements like, “‘All options are on the table’ regarding tariff decisions on Chinese imports.”

It’s worth noting that the downbeat signals for Friday’s US Nonfarm Payrolls (NFP), as well as softer prints of some other US data, weighed on the previous odds favoring the Fed’s aggressive rate hikes.

US ADP Employment Change eased to 128K for May, versus 300K forecasts and a downwardly revised 202K previous reading. The Weekly US Initial Jobless Claims, on the other hand, dropped to 200K compared to 210K anticipated and 211K prior. Further, Nonfarm Productivity and Unit Labor Costs both improved in Q1, to -7.3% and 12.6% respectively, compared to -7.5% and 11.6% figures for market consensus. Furthermore, US Factory Orders for April softened to 0.3%, from a revised 1.8% in March and 0.7% forecast.

On the other hand, Federal Reserve Vice-Chair Lael Brainard and Cleveland Fed President Loretta Mester repeated the statements suggesting higher odds favoring the Fed’s aggression in rate hikes.

Moving on, the monthly prints of the US employment data and ISM Services PMI for May will be crucial for markets. That said, the headlines US NFP is expected to ease to 325K versus 428K prior whereas the ISM Services PMI may retreat from 57.1 to 56.4.

Read: Nonfarm Payrolls Preview: It is all about the money, three scenarios for wage growth and the dollar