S&P500 Futures drop to five-week low, yields refresh yearly top on hawkish Fed Minutes, global economic woes

• Market sentiment remains sour as Fed hawks shows determination to battle with inflation despite looming economic fears.
• Fitch ratings revised down growth forecasts of 10 developed economies, China woes stay on the table.
• S&P500 Futures trace Wall Street to print three-day downtrend and refresh monthly low.
• US 10-year Treasury bond yields prod 2022 peak that triggered recession fears.

The risk appetite remains downbeat early Thursday as market players fear hawkish Fed bias amid global economic woes. Also challenging the sentiment could be the geopolitical/economic woes emanating from China, as well as the recently mixed US data.

While portraying the mood, S&P500 Futures dropped to the lowest level in five weeks, indecisive around the multi-day bottom surrounding 4,415-20 by the press time. In doing so, the US stock futures trace losses made by the Wall Street benchmark.

Elsewhere, the US 10-year Treasury bond yields rise to the highest level since October 2022, around 4.298% at the latest. It should be noted that such a high level of bond coupons triggered fears of economic slowdown and drowned the riskier assets, while also underpinning the US Dollar, during the late 2022.

Apart from the status of the benchmark bond coupon, fears of witnessing a slowdown in the economic transition of the 10 developed economies, backed by the Fitch Ratings’ quarterly Global Economic Outlook report, also weigh on sentiment.

With this, the US Dollar Index renews the two-month high while the prices of Gold and WTI crude oil remains pressured.

It’s worth noting that the latest Fed meeting minutes highlighted the policymakers’ discussion on the inflation pressure, despite marking a division on the rate hike decision. That said, the Minutes also conveyed that most policymakers preferred supporting the battle again the ‘sticky’ inflation. While helping the markets to justify hawkish Fed bias, US Industrial Production traced upbeat Retail Sales figures.

Elsewhere, a slump in China’s housing prices marked the first fall of the year in June and joins the fears about another bond market crisis in the Dragon Nation, as the biggest private realtor Country Garden struggles to pay bond payments, to propel the USD/CNH price.

It should be observed that the Chinese policymakers have been trying by all means to defy the concerns about easing economic recovery but no meaningful market reaction has been witnessed of late, which in turn flags concerns about the recession of the world’s second-largest economy.

Looking ahead, the US weekly jobless claims and Philadelphia Fed Manufacturing Survey for August should be watched for intermediate directions while the risk catalysts are the key for a clear guide.

Also read: Forex Today: Dollar keeps rising after Fed minutes, Pound outperforms