Yields fade rebound, stock futures pare losses amid mixed concerns, recession in focus

• Market sentiment dwindles as China’ covid woes battle short-covering moves amid absence of major data/events.
• Yields fade bounce off multi-day low, stock futures print gains.
• Second-tier US data, risk catalysts are the key for intermediate directions ahead of Friday’s US NFP.

The risk profile improves during Thursday’s sluggish session as traders await more clues while consolidating the recent moves. In doing so, the chatters surrounding China’s readiness for more stimulus and softer US data helped to improve the sentiment.

While portraying the mood, the US 10-year Treasury yields struggle to extend the previous day’s rebound from a five-week low, taking rounds to 2.93% by the press time. Additionally, the S&P 500 Futures rise 0.30% whereas the Euro Stoxx 50 Futures gain over 1.0% heading into Thursday’s European session.

Comments from China’s Commerce Ministry, suggesting measures to increase vehicle consumption, follow the 500 billion yuan infrastructure plan to challenge the market’s pessimism. On the same line could be a lack of major data, mainly due to the cancellation of the US ADP Employment Change for June and July.

Furthermore, softer US data prints also allowed the bears to take a breather. That said, US ISM Services PMI for June dropped to 55.3 versus 55.9 in May. The actual figure, however, came in better than the market expectation of 54.5. It’s worth noting that the US JOLTS Job Opening for May declined to 11.25 million versus 11.00 million expected and 11.68 million prior.

It’s worth mentioning that the inverse yields curve of the 2-year and 10-year Treasury bonds previously signaled recession fears and drowned the sentiment. The same propelled the US dollar and weighed on the prices of commodities and Antipodeans.

Looking forward, weekly US Jobless Claims and the monthly trade numbers could join ECB Minutes to entertain traders. However, major attention will be given to recession talks and the US Nonfarm Payrolls (NFP) for June as the Federal Open Market Committee (FOMC) Minutes signaled that the Fed policymakers are determined to announce another 75 basis points (bps) of a rate hike. That said, the latest Fed Minutes highlighted the need for the “restrictive stance of policy” while also saying, “even more restrictive stance could be appropriate if elevated inflation pressures were to persist”.