S&P 500 Futures flirt with two-month top, yields stabilize as economic fears precede US NFP

  • Market sentiment dwindles as recession woes join pre-NFP anxiety.
  • S&P 500 Futures grind higher at multi-day top, yields snap two-day downtrend.
  • BOE, RBA and Fedspeak keep economic slowdown fears on the table.
  • China-inspired geopolitical concerns also challenge the risk-on mood.

Global markets remain sluggish, with a pause in bond buying, as traders await the all-important US jobs report for July during Friday’s Asian session. It’s worth noting that the fears of economic slowdown and tension surrounding Taiwan are extra catalysts that weigh on the market sentiment.

Even so, S&P 500 Futures print mild gains while taking rounds to the two-month high flashed the previous day, up 0.23% intraday around 4,162 by the press time. Also, the US 10-year Treasury yields stabilize around 2.069% after declining in the last two days. Even so, the US Treasury yields continued to portray the risk of recession as the difference between the 10-year and 2-year bond coupons remain the widest since 2000.

Earlier in the day, the Reserve Bank of Australia’s (RBA) quarterly Monetary Policy Statement backed the market’s recession fears while tracking the Bank of England’s (BOE) moves. That said, the Bank of England (BOE) conveyed the UK recession in late 2022. On the same line were comments from Cleveland Fed President Loretta Mester who mentioned recession risks have increased in the US.

It should be noted, however, that the recently firmer data from Europe, the latest one being the German Factory Order, joins the cautious tone of the major central bankers to help the equity buyers in keeping control. JP Morgan cites short covering moves by the retail investors as the catalyst behind the recently firmer equities.

That said, the US Initial Jobless Claims rose to 260K for the week ended on July 30 versus 254K prior and 259K expected. Further, job cuts eased and German Factory Orders improved while the US Goods and Services Trade Balance improved to $-79.6B versus $-80.1B market consensus and $-84.9B revised prior.

Given the mixed market performance, mainly the mildly bid equities in contrast to the pessimism, the traders should wait for the US Nonfarm Payrolls (NFP) for July, expected 250K versus 372K prior, for clear directions. Also important to watch will be the global reaction to China’s strong military drills near Taiwan.

Also read: Nonfarm Payrolls Preview: High expectations set deal the dollar a blow, create buying opportunity