S&P 500 Futures, US Treasury yields portray cautious optimism on mixed clues

• Market sentiment remains mildly positive amid mixed headlines from FOMC Minutes, China and Ukraine.
• S&P 500 Futures track Wall Street’s gains, Treasury yields rebound from monthly low.
• Light calendar, holidays in Europe may restrict market moves ahead of second-tier US data.

After a sluggish start to the week, risk appetite improves during the mid-Asian session on Thursday as Fed minutes underpinned cautious optimism. Even so, headlines from China and Ukraine test the market sentiment amid a mostly quiet Asian session.

While portraying the mood, the S&P 500 Futures print mild gains around 3,980 whereas the US 10-year Treasury yields again bounce off monthly low, after Wednesday’s failed attempt, up 2.5 basis points (bps) to 2.77% at the latest.

As per the latest Federal Open Market Committee (FOMC) Minutes, the policymakers endorsed the idea of 50 basis points (bps) rate hikes for only the next couple of meetings, raising doubts on the rate-lift trajectory past September. The Minutes rather highlighted inflation concerns and mentioned, “It would be appropriate to consider sales of mortgage-backed securities.”

It’s worth noting that such statements renewed concerns of limited monetary policy tightening and helped Wall Street to post the biggest daily gains in a week.

Also favoring the trading sentiment is the downbeat US data that backs the need for easy money. Other than the Fed Minutes, downbeat prints of the Durable Goods Orders for April also weighed on the US Dollar. As per the latest US Durable Goods Orders, the growth slowed down to 0.4% MoM versus market forecasts and revised down prior readings of 0.6%. Also, the Core Durable Goods Orders rose 0.3% MoM versus 0.6% expected and 1.1% prior (revised).

On the flip side, the latest headlines from China and Ukraine seem to challenge the market sentiment. That said, “Ukrainian President Volodymyr Zelensky on Wednesday savaged suggestions that Kyiv gives up territory and make concessions to end the war with Russia, saying the idea smacked of attempts to appease Nazi Germany in 1938,” per Reuters. On the same line, China criticizes the US Draft Security Council resolution on North Korea and adds to the recently alive Sino-American tensions.

Moving on, an off in Europe may restrict market moves and let the post-FOMC Minutes move to extend ahead of the US session. However, the second-tier US data, like preliminary GDP for Q1 2022 and Personal Consumption Expenditure (PCE) details for April, may entertain traders.

Read: Post FOMC: Market shift from catch-down camp to short covering mode