US Treasury yields, stock futures remain defensive amid quiet Asian session

• Market sentiment dwindles as a lack of macro/data follows recently positive mood.
• US 10-year Treasury yields remain pressured, stock futures track Wall Street to print mixed moves.
• Softer US data, Fedspeak enables cautious optimism ahead of US Retail Sales.

After an initial consolidation in the market’s risk profile, mostly to the positive side during the last two days, global markets remain sidelined during Tuesday’s Asian session amid a light calendar/macro stream. Also challenging the mood could be the anxiety ahead of the US Retail Sales for April, expected at 0.7% versus 0.5% prior.

While portraying the market sentiment, the US 10-year Treasury yields rose to 2.9%, up by two basis points (bps), whereas the S&P 500 Futures remain directionless around the 4,000 threshold by the press time.

The US Treasury yields dropped the previous day, with the US Dollar Index (DXY), as a fall in the NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue. It should be noted that the news suggesting the US extend covid public health emergency beyond July also allowed the US dollar to pare some gains. That said, the US Dollar Index (DXY) eased further from its 20-year top, printed a two-day downtrend as sellers approach 104.00 by the end of Monday’s North American session. The softer yields and hopes of not-so-heavy rate hikes helped the Wall Street benchmarks, even as US equities printed mixed closing on Monday.

On the flip side, the recent headlines from Shanghai, conveying plans to end the covid-linked lockdown seems to have favored the risk appetite. The reason could be linked to the Chinese state’s third consecutive day of zero coronavirus cases outside quarantine.

It’s worth noting that the mixed numbers of the US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, join the market’s indecision over the Fed’s next moves to keep the traders cautious.

Looking forward, headlines concerning covid and the Russia-Ukraine crisis, as well as the Fedspeak, will act as extra catalysts, in addition to the US Retail Sales, to direct short-term market moves.