S&P 500 Futures portray risk-aversion, extended weekend limits yields

• Market sentiment remains sour amid fears of Fed’s aggression despite economic slowdown.
• S&P 500 Futures trace Wall Street’s losses, off in Japan, the US restrict bond market moves.
• Fed Minutes, US CPI will be crucial for near-term directions as risk-off mood prevails.

Risk profile remains weak during early Monday despite the holidays in the US, Japan and Canada. The sour sentiment could be linked to the recently firmer expectations of the Fed’s 75 bps rate hike and geopolitical woes surrounding Russia. Also keeping the bears hopeful are the fears of economic slowdown and cautious mood ahead of this week’s key US inflation data and the Fed minutes.

While portraying the mood, the S&P 500 Futures dropped for the fourth consecutive day while poking the monthly low near 3,630, down 0.60% intraday at the latest. That said, the US 10- Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90%.

Friday’s jobs report for September showed that the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions, as well as weighing on the market’s mood, was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior.

Considering the firmer US data and hawkish Fedspeak, the market expectations of witnessing a 0.75% rate hike in the next Federal Open Market Committee (FOMC) became stronger of late despite growing fears of economic slowdown.

Recently, the escalation in the Russia-Ukraine tussles, following an explosion that destroyed a part of the bridge in Crimea which is crucial for Russia's war supplies, also contributed to the market’s sour sentiment. On the same line could be China’s downbeat PMIs. During the weekend, China’s Caixin Services PMI for September dropped to 49.3 from 55.0 prior. With this, the private activity gauge marked the first contraction since May.

Amid these plays, the US Dollar Index (DXY) remains mildly bid near 112.80 during the four-day uptrend that reverses the previous pullback from the 20-year high. The same weigh on the prices of commodities but the holidays in the key markets challenge the momentum traders.

Moving on, Wednesday’s Federal Open Market Committee (FOMC) Minutes and Thursday’s US Consumer Price Index (CPI) will be crucial for short-term directions.

Also read: Gold Weekly Forecast: XAU/USD remains sensitive to US yields as focus shifts to CPI