S&P 500 Futures stay pressured, yields bounce off five-week low amid recession risk

• Market sentiment remains divided as traders take a breather after a volatile day.
• Fears of global slowdown, central bank aggression and China’s covid woes offered a trifecta impact to drown sentiment.
• Anxiety ahead of the Fed Minutes, US ISM Services PMI appears to weigh on risk appetite of late.

Risk profile remains weak, despite the recent consolidation in the market, as traders remain worried over recession fears during Wednesday’s Asian session.

Even so, the US 10-year Treasury yields rebound from a five-week low marked the previous day, up by two basis points (bps) to 2.82% at the latest. That said, the S&P 500 Futures struggle for directions around 3,830 by the press time.

Increased doubts over supply-chain improvement and the escalation in the Russia-Ukraine tussles escalated the fears of global recession on Tuesday. The risk-off mood also took clues from the speculations that China may recall covid-led lockdowns, after it announced mass covid testing. The pessimism intensified after Germany and Italy flashed economic warnings while the Bank of England (BOE) also released a report conveying the grim economic outlook.

It should be noted that the firmer prints of the US Factory Orders for May, to 1.6% MoM versus 0.5% expected and upwardly revised 0.7% previous readings, also underpinned the risk-off mood by way of increasing the hawkish Fed bets.

Furthermore, the inverted curve between the 2-year and 10-year Treasury yields also portrayed the risk of a global economic slowdown.

Looking forward, updates on the economic health and China’s covid conditions are the key for traders while the Federal Open Market Committee (FOMC) Minutes and the US ISM Services PMI for June will offer additional directions.

Also read: Dollar rallies on risk-averse usd buying