S&P 500 Futures, yields portray firmer sentiment amid full markets, US ISM PMI eyed

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  • Risk profile improves amid hopes of multiple stimulus, return of full markets.
  • Receding hawkish Fed bets, a light calendar ahead of RBA also favor cautious optimism.
  • S&P 500 Futures extend bounce off seven-week low, US 10-year Treasury yields stay firmer.
  • US ISM Services PMI for August will decorate the calendar.

Market sentiment appears positive during Tuesday’s Asian session as the return of the US and Canadian traders after the long weekend joins hopes of stimulus to push back recession woes. Also keeping the traders positive were recently easing hawkish Fed bets, as well as a light calendar.

While portraying the mood, the US 10-year Treasury yields rise 2.1 basis points (bps) to 3.21% whereas the S&P 500 Futures extend the week-start recovery to 3,953, up 0.75% intraday by the press time.

Be it the incoming UK PM Liz Truss’ £130 billion energy plan or the People’s Bank of China’s (PBOC) cut in the Reserve Requirement Ratio (RRR), not to forget stimulus from Germany/Eurozone, policymakers are all in to battle with the recession woes. In addition to the stimulus hopes, recently mixed data also challenges the hawkish expectations from the major central banks, which in turn supports the latest optimism.

That said, the CME’s FedWatch Tool hints at the 60% chance of the Fed’s 0.75% rate hike in September, versus over 75% marked in the previous week. The easing in the hawkish Fed bets could be linked to the mixed US jobs report for August.

Alternatively, recession fears remain on the table amid the energy crisis while the US-China tussles and mixed data could keep the traders on their toes.

However, the pullback in the US Dollar Index (DXY) from the 20-year high and sluggish moves in oil prices suggests the further consolidation of the market sentiment.

For that matter, today’s US ISM Services PMI for August, expected 55.5 versus 56.7 prior, will be eyed closely.

Also read: ISM Services PMI Preview: High bar to help dollar bears pass through and take over