S&P500 Futures grind near three-week low, yields retreat from worrisome levels amid pre-NFP consolidation

• Market sentiment remains slightly positive as traders brace for US employment report for June.
• Hopes of witnessing China stimulus, expectations of stable economy also allow risk barometers to pare recent losses.
• S&P500 Futures snap three-day losing streak with mild gains, US 10-year Treasury bond yields step back from nine-month high.
• Economic fears can join hawkish Fed bets and propel US Dollar, yields on welcome prints of US NFP, Unemployment Rate.

The risk appetite improves during early Friday, after sentiment roiled in the last three consecutive days, as markets portray the pre-data consolidation ahead of the US employment report for July. Also allowing the pessimists to take a breather are the headlines from China suggesting more stimulus and a stable economy, as well as recently mixed US data.

While portraying the mood, the S&P500 Futures rebound from the lowest level in a week while snapping a three-day losing streak near 4,535, up 0.35% intraday by the press time. On the same line, the US 10-year Treasury yields also retreat to 4.15% after rising to the highest level since November 2022 the previous day. It’s worth noting that the US bond coupons were heading towards the worrisome levels that previously triggered economic hardships, which in turn teased the US Dollar bulls due to its haven allure.

That said, the US Dollar Index (DXY) also extends Thursday’s pullback from a nine-week-old falling resistance line to 102.40, which in turn allows commodities and Antipodeans to pare weekly losses. As a result, the Gold Price prints mild gains near $1,935 but the WTI crude oil drops a bit as energy markets prepare for the OPEC+ verdict.

Apart from the market’s positioning for the US data, chatters about China's stimulus and stability of the world’s second-largest economy join the Sino-American tussles to prod the previous risk-off mood. Recently, People's Bank of China Governor Pan Gongsheng was spotted meeting big property developers from China and assured them to provide the needed help to defend the housing sector. It’s worth noting that the PBoC Governor and China state planner hinted at a stable economy after holding an unscheduled meeting.

Alternatively, the news stating that key Republican urges Biden to set broad restrictions on US investments in China, shared by Reuters, prods the Aussie pair buyers amid a cautious mood ahead of the US employment report.

On Thursday, US ISM Services PMI dropped to 52.7 for July from 53.9 prior, versus 53.0 market forecasts. The details of the ISM Services Survey unveiled that Employment Index and New Order Index also came in softer but the Prices Paid jumped to a three-month high. Further, the US Factory Orders improved to 2.3% MoM for June versus 0.4% prior (revised) and 2.2% market forecasts while Initial Jobless Claims matches 227K expected figures for the week ended on July 28 from 221K prior. Additionally, the preliminary readings of the Nonfarm Productivity for the second quarter (Q2) rallied by 3.7% compared to the 2.0% expected and -1.2% previous readings whereas Unit Labor Cost eased to 1.6% for the said period versus 2.6% consensus and 3.3% prior.

Moving ahead, headlines about the US bond market, employment reports and China may entertain traders. That said, the early signals for the employment report have been positive but the headline Nonfarm Payrolls (NFP) bears downbeat market forecasts, likely softening to 200K versus 209K prior. Further, the Unemployment Rate is likely to remain static at 3.6%.

Also read: Forex Today: A cautions tone ahead of NFP