US 10-year Treasury yields, S&P 500 Futures portray risk-off mood

• US 10-year Treasury yields drop for second consecutive day, S&P 500 Futures snap four-day uptrend.
• Escalating virus woes challenge economic recovery, tensions in the Middle East also weigh on the mood.
• China data dump, US stimulus headlines and covid updates in focus.

Market sentiment remains sour at the week’s start as coronavirus keeps daunting the economic recovery hopes, geopolitical tussles in the Middle East and US stimulus deadlock.

As a result, the risk barometers like the US 10-year Treasury yields & S&P 500 Futures remain pressured, extending Friday’s downbeat performance by the press time.

That said, the US bond coupon drop three basis points (bps) to 1.268%, following the heaviest drop since July 06 printed the previous day. The key US stock futures gauge is also showcasing the sour risk appetite while declining for the first time in five days, down 0.25% around 4,452 at the latest.

Among the main catalysts are the latest jump in the virus numbers and the Taliban’s takeover of Afghanistan. As per the recent figures, hospitalizations for 30–39 years old in the US jump to a record high whereas infections in Japan, per the latest government figures, also refreshed their all-time peak on Sunday. It’s worth noting that a bit easy numbers from Australia and the UK combat grave concerns in China, the world’s industrial powerhouse.

Elsewhere, the Taliban’s clear warning to anyone who interferes in their power race in Afghanistan joins upcoming general elections in Canada and the ECB President Christine Lagarde’s likely absence from Jackson Hole Symposium weighs on the risk appetite.

On Friday, the preliminary readings of the US Michigan Consumer Sentiment Index for August slumped to the 11-year low, raising fears that the world’s largest economy is facing a tough challenge from the Delta covid strain.

Looking forward, virus concerns are likely to keep weighing on the global supply market and may push the policymakers to dial back the easy money even as the pandemic is re-firming its grips. The same should underpin the US dollar’s safe-haven demand but the deadlock over the infrastructures stimulus and budget plans may challenge the greenback moves going forward.

At a shorter distance, China’s July month Retail Sales and Industrial Production will be the key to follow for fresh impulse. While both the numbers are likely to ease, any surprise jump may help renew market optimism at least for now.