US Treasury yields retreat from monthly high on cautious mood, US calendar eyed

• US 10-year Treasury yields snap two-day uptrend, stock futures fade bounce off weekly low.
• Mixed US PMIs battle rebound in US inflation expectations to probe Fed hawks.
• US Core PCE Inflation, FOMC Minutes gain major attention.

Market sentiment sours during the early trading hours of the key calendar day, i.e. Wednesday. Other than the pre-data caution, mixed figures from the US also challenge the market’s mood of late.

While portraying the sentiment, the US 10-year Treasury yields drop 2.2 basis points (bps) to 1.638% whereas the S&P 500 Futures drop 0.25% by the press time. Further, the US Dollar Index (DXY) dribbles around a 16-month high and the gold prices consolidate recent losses as well.

Having witnessed hawkish response to US President Joe Biden’s Fed nominations, preliminary activity numbers from the US came in mixed for November. Markit Manufacturing PMI rose past expectations and prior but not the Services index, which in turn weighed on the Composite gauge. That said, US Richmond Fed Manufacturing Index crossed the expected figure of 5 but stayed below 12 previous readouts to 11 for November.

It’s worth noting, however, that the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, snapped a two-day downtrend to rebound from a fortnight low afterward.

In addition to the US economics, fears that today’s heavy economic calendar may not favor the Fed hawks amid the covid resurgence in the Eurozone also challenge the risk appetite. Additionally, fears over the US-China tussles and challenges to the global central bankers to call back the easy money policies amid rising inflation and covid fears also roils the mood in the market.

Looking forward, October month’s Durable Goods Orders, the second estimate of the Q3 US Gross Domestic Product (GDP), the latest FOMC Meeting Minutes and October’s core PCE inflation are crucial for the market players to watch. Market bulls will be less interested in witnessing the coronavirus-led challenges to the scheduled data/events.