S&P 500 Futures, yields retreat from multi-day high as Ukraine, China weigh on sentiment

• Global markets began the NFP week on a negative side on headlines concerning Ukraine-Russia, Shanghai.
• S&P 500 Futures retreat from six-week high, US 10-year Treasury yields step back from the highest levels since 2019.
• Fed policymakers keep signaling aggressive tightening ahead, softer US data allowed for consolidation in bond markets.
• Headlines over peace talks in Turkey, China’s covid updates will be important for intraday directions.

Traders turn risk-averse as the key week comprising the US jobs report for March begins. In addition to the pre-NFP anxiety, weekend headlines suggesting further geopolitical tensions between the West and Russia, as well as indecision over the Moscow-Kyiw talks, also weigh on the market’s sentiment.

While portraying the mood, the US 10-year Treasury yields retreat from the highest since May 2019 to 2.45%, down 4.2 basis points (bps), whereas the S&P 500 Futures drop 0.23% intraday, to 4,526 at the latest. It’s worth noting that the US Dollar Index (DXY) cheers the risk-off mood while printing the four-day uptrend while approaching the 99.00 threshold by the press time.

That said, comments from US President Joe Biden suggesting the indirect threat to the Russian President Vladimir Putin triggered risk-off mood during the early Asian, even as the White House and Germany tried to placate the fears.

On the same line was anxiety ahead of this week’s peace talks in Turkey as Ukrainian President Volodymyr Zelenskyy pushed for the progress of the Ukraine-Russia peace talks by saying, “We're ready to discuss neutrality and non-nuclear status if security guarantees are provided.” However, his statements like, “Ukraine to insist on sovereignty and territorial integrity with talks with Russia,” challenges the odds of success.

Elsewhere, New York Fed President and an FOMC member John Williams said on Friday that the speed of interest rate hikes this year should be data-driven. However, multiple Fed policymakers before him have already signaled a faster rate hike trajectory amid inflation fears. That said, the US inflation expectations per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data refresh record top and also weigh on the market’s mood. Alternatively, Friday’s softer prints of the Michigan Consumer Sentiment data and housing numbers from the US probe Fed hawks.

It should be noted that the worsening virus conditions in China and Europe keep bears hopeful as equities remain firmer despite strong yields and signals of tighter monetary policy ahead. Recently, Shanghai announced a lockdown to tame the record covid cases.

Moving on, a light calendar during the initial weekdays can challenge the momentum traders but risk catalysts and NFP are likely to keep the markets volatile.

Read: Shaky finish to the week for equities