S&P 500 Futures retreat from three-month high, yields stay pressured on mixed concerns

• Market sentiment remains sluggish as traders await Fed Minutes to overcome the anxiety after last week’s softer US inflation.
• Mixed headlines surrounding China, Taiwan also weigh on the risk appetite.
• China data dump, second-tier US statistics to entertain intraday traders.

Global markets fade the previous week’s optimism as traders await fresh clues from the US Federal Reserve amid mixed feelings during Monday’s Asian session. Also challenging the sentiment are the mixed headlines concerning China and the Fed policymakers’ resistance to welcoming softer US inflation data.

While portraying the mood, the US 10-year Treasury yields remain pressured at around 2.84% after posting weekly losses by the end of Friday. Further, S&P 500 Futures print 0.25% intraday losses while Japan’s Nikkei 225 rises 0.65% on a day by the press time. It’s worth noting that Wall Street rallied on Friday.

Weekend news suggests that a probable meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, as signaled by the Wall Street Journal (WSJ), could favor the risk-on mood. Also positive for the mood were headlines suggesting improved coronavirus conditions in China's financial hub Shanghai. However, the increased count of the US lawmakers who is visiting Taiwan challenges the sentiment.

It’s worth noting that the People’s Bank of China (PBOC) recently cut the one-year medium-term lending facility (MLF) rates by 10 basis points (bps) and tried to push back the bears.

During the last week, softer prints of the US Consumer Price Index (CPI) and the Producers Price Index (PPI) managed to ease the market’s inflation fears. Even so, Richmond Federal Reserve (Fed) Bank President Thomas Barkin said on Friday that he wants to raise interest rates further to bring inflation under control. "I'd like to see a period of sustained inflation under control, and until we do that I think we are just going to have to move rates into restrictive territory," Barkin told CNBC, per Reuters.

Previously, San Francisco Fed President Mary Day backed opportunities of witnessing another 75 basis points (bps) of a rate hike in September, while also suggesting an upfront 0.50% rate hike to be sure. Also, Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans sounded grim. That said, Fed’s Kashkari mentioned that he hasn't "seen anything that changes" the need to raise the Fed's policy rate to 3.9% by year-end and to 4.4% by the end of 2023. Further, Fed policymaker Evans stated, “The economy is almost surely a little more fragile, but would take something adverse to trigger a recession.” Fed’s Evans also called inflation "unacceptably" high.

Given the market’s indecision over the Fed’s next moves, coupled with the long week ahead, traders may witness a lack of major moves ahead of the key data/events. Among them, today’s US Empire State Manufacturing PMI for August could gain the first attention. However, the key will be Wednesday’s Minutes of the latest Federal Open Market Committee (FOMC) meeting.