S&P 500 Futures, yields stay pressured as traders await fresh clues ahead of PMIs

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  • Market sentiment remains pressured, the US dollar gains upside momentum.
  • Yields portray three-day downtrend, S&P 500 Futures differ from Wall Street.
  • Flash readings of S&P Global PMIs for July will be important ahead of next week’s FOMC.

Market sentiment remains sluggish during early Friday, as traders take a breather after the European Central Bank (ECB)-impressed volatility. The market’s latest inaction could also be linked to the lack of major data/events, as well as the market’s wait for flash readings of S&P Global PMIs for July for the key economies like the US, the UK, Germany and the Eurozone.

Amid these plays, the US Dollar Index (DXY) picks up bids to refresh its intraday high around 106.80, up 0.22% on a day, as risk-aversion returns to the table. That said, Wall Street benchmarks closed firmer and the US Treasury 10-year Treasury yields marked the biggest daily slump in five weeks, down one basis point (bps) to 2.90% at the latest. That said, S&P 500 Futures drops 0.45% by the press time.

The latest weakness in the market’s sentiment emanates from the recheck of the optimism following the ECB’s verdict, as well as the pre-established fears of recession and covid. Also underpinning the US dollar’s safe-haven demand is the next week’s Federal Open Market Committee (FOMC).

A slump in the US Treasury yields, due to the European Central Bank’s (ECB) higher-than-expected 50 basis points (bps) rate hike, drowned the US dollar the previous day. On the same line was the announcement of a new tool called the Transmission Protection Instrument (TPI) to tame disorderly market dynamics in the bloc.

It’s worth observing that anticipated weakness in the US PMIs and likely weakness in the UK and the eurozone activity data for July are also likely to help market sentiment in the short-term, which in turn could exert downside pressure on the US dollar and favor equities, gold and Antipodeans.

Alternatively, recession fears remain on the table and the Fed policymakers are bracing for faster rate hikes, especially after the latest ECB, which in turn can keep the risk appetite weaker moving on.