S&P500 Futures, yields ignore Sino-American tension while bracing for US CPI with mild gains

• Market sentiment improves despite looming US-China tussles, economic shocks.
• S&P500 Futures rebound from one-month low, yields also recover amid lackluster session.
• Increasing bets on Fed policy pivot highlights today’s US inflation data, especially after downbeat US NFP.
• Risk catalysts, ECB updates eyed ahead of US CPI for July.

Traders seek solace in the pre-data consolidation as the riskier assets pare recent losses during early Thursday despite challenging news about the US-China trade war. The reason could be linked to the policymakers’ optimism about the use of tools to defend respective currencies ahead of the US inflation data, per the Consumer Price Index (CPI), for July. Also important to watch is the European Central Bank’s (ECB) monthly Economic Bulletin.

While portraying the mood, the S&P500 Futures print mild gains as it snaps a two-day losing streak at the lowest level in a month, up 0.20% intraday near 4,500 by the press time. On the same line, the US 10-year Treasury bond yields dropped in the last two consecutive days to signal the first weekly loss in four, around 4.01% by the press time.

Be it the People’s Bank of China’s (PBoC) sturdy defense of the Yuan or the Bank of Japan’s (BoJ) confidence in the easy-money policy, not to forget the optimism at the Federal Reserve (Fed) and the ECB, policymakers at the major central banks defy the fears of the global recession. The same joins the recently mixed reaction to China’s downbeat inflation data and US President Joe Biden’s slightly easy ban on the technology investment in Beijing to allow the traders to better brace for today’s top-tier data/events.

On the contrary, China's Commerce Ministry showed grave concerns and marked the right to take measures in retaliation early Thursday in Asia, per Reuters. The news also quotes China Commerce Ministry as saying, “Hopes that the US will respect laws of market economy and the principle of fair competition.” It’s worth observing that China's Commerce Ministry showed grave concerns and marked the rights to take measures in retaliation early Thursday in Asia, per Reuters. The news also quotes China Commerce Ministry as saying, “Hopes that the US will respect laws of market economy and the principle of fair competition.”

Furthermore, the looming economic fears from China, Europe and the UK join the global rating agencies’ crackdown on banks to weigh on the sentiment. On the same line are fears of deflation in China and the market’s doubts about future moves of the major central banks.

Moving on, US inflation numbers for July become all the more important after the latest disappointment from the Nonfarm Payrolls (NFP) for the said month. Further, the recently downbeat MBA Mortgage Applications, falling for the third consecutive week of late, also test the DXY bulls, especially amid the growing chatters of the Federal Reserve’s (Fed) policy pivot. With this, the CME Group FedWatch Tool shows that markets are pricing in an 86.0% chance that the Federal Reserve will pause interest rate hikes at its meeting in September. 

Also read: US CPI Preview: Forecasts from 10 major banks, monthly pace should hold at 0.2%