S&P 500 Futures, US Treasury bond yields remain pressured ahead of ECB, US inflation

• Global markets turn cautious ahead of the week’s key data/events.
• S&P 500 Futures extend previous day’s losses but bond coupons struggle to remain firmer.
• Inflation, growth fears join the light calendar in Asia to also test the sentiment.

After witnessing a risk-off day on Wednesday, market players struggle for clear directions as they brace for crucial events amid a quiet start to Thursday. Also challenging the market moves are fears surrounding inflation and growth, not to forget cautious optimism in China and talks of hawkish monetary policy moves ahead.

While portraying the mood, US 10-year Treasury yields seesaw around 3.034% after rising over five basis points (bps) to 3.04% the previous day. Also, S&P 500 Futures print mild losses near 4,110 after snapping a two-day rebound on Wednesday.

The European Central Bank (ECB) is up for announcing the latest monetary policy verdict on Thursday amid the market’s expectation of witnessing clues for a July hike. It’s worth noting, however, that the bloc’s central bank is the last among major ones to most-probably end the asset purchase during today’s meeting, which in turn tests the bears.

On the other hand, softer prints of the Fed’s preferred inflation gauge, namely the Core PCE Price Index challenges the pre-CPI notion. That said, US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, stay firmer around the one-month high of late.

It should be observed that chatters surrounding the faster monetary policy normalization will weigh on the economic transition, mainly due to the recent covid and geopolitical woes, which seem to have challenged the market sentiment. On Wednesday, White House spokeswoman Karine Jean-Pierre said they expect the inflation numbers to be released at the end of the week to be elevated. Additionally, the Organisation for Economic Co-operation and Development (OECD) cuts the global growth outlook for 2022 while World Bank (WB) President David Malpass warned that faster-than-expected tightening could recall a debt crisis similar to the one seen in the 1980s.

Moving on, today’s monetary policy decision from the European Central Bank (ECB) will be important for the traders, due to its direct impact on the US dollar and the market sentiment. Following that, Friday’s inflation data from China and the US will be crucial to watch for fresh impulse. Should the risk-aversion continue, the markets may witness further US dollar strength.

Also read: US CPI Preview: Soft core set to drive dollar down, and two other scenarios