S&P500 Futures lick the wounds, yields dribble despite cautious optimism about China, Russia

• Market sentiment improves amid sluggish session, takes clues from China, Russia.
• S&P500 Futures pare the first weekly loss in six, US Treasury bond yields lack clear directions.
• Concerns about China stimulus, growth forecasts and Russia geopolitics allow traders to tame previous fears.
• US inflation clues, central bankers eyed for clear directions.

The risk appetite remains mildly positive early Monday, after witnessing a slew of central bank moves and geopolitical concerns about China weighed on the sentiment. However, the weekend headlines suggesting sooner China stimulus join doubts about Russian President Vladimir Putin’s power in Moscow to underpin the cautious optimism. Alternatively, S&P’s recent downbeat China GDP forecasts and hawkish Fed concerns prod the market’s risk-on mood.

Amid these plays the S&P500 Futures rebound from the lowest levels in a week toward regaining the 4,400 round figure, up 0.20% intraday near 4,398 at the latest. That said, the US 10-year Treasury bond yields remain sidelined near 3.73%, after snapping a two-week downtrend, whereas the two-year counterpart braces for the fourth consecutive weekly winning streak near 4.74% by the press time.

Recently, global rating giant S&P cut China’s Gross Domestic Product (GDP) growth forecasts for 2023 to 5.2% from 5.5% previous estimations. On the same line are concerns suggesting major investors’ pause in China investment, hawkish comments from the Fed officials and comparatively upbeat US data.

Alternatively, Ning Jizhe, deputy head of the economic committee of the Chinese People's Political Consultative Conference (CPPCC) and a former vice head of the National Development and Reform Commission (NDRC) flagged concerns about sooner stimulus from China and favored the risk-on mood earlier in the day. On the same line are chatters that the Russian geopolitical woes may help ease the war between Moscow and Kyiv. “Heavily armed Russian mercenaries withdrew from the southern Russian city of Rostov under a deal that halted their rapid advance on Moscow but raised questions on Sunday about President Vladimir Putin's grip on power,” said Reuters in this regard.

That said, US S&P Global PMIs for June came in mixed as the Manufacturing PMI dropped to 46.3 from 48.4 prior, versus 48.5 expected, whereas the Services PMI improved to 54.1 from 54.0 expected despite being lesser than the 54.9 previous monthly figure. With this, the Composite PMI declined to 53.0 versus 54.4 market forecasts and 54.3 prior. Following the mixed US PMIs, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said, “Any further rate hikes will of course have a further dampening effect on this sector (services) which is especially susceptible to changes in borrowing costs." That said, Federal Reserve Bank of San Francisco President Mary Daly told Reuters on Friday that two more interest rate increases this year would be a "very reasonable projection."

Amid these plays, the US Dollar Index (DXY) pare recent gains but the WTI crude oil struggles to cheer the downbeat USD and cautious optimism. That said, the Gold Price prints mild gains whereas Antipodeans also edge higher.

Looking forward, the US inflation numbers will join the speeches of the top-tier central bankers at the European Central Bank (ECB) Forum to entertain market players. Additionally, US Durable Goods Orders and Bank Stress Tests are additional catalysts to observe.

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