- Market sentiment remains dicey as traders await US Retail Sales, Industrial Production.
- Sino-US headlines, concerns about Fed policy pivot keep optimists hopeful.
- Wall Street benchmarks remain on the front foot at the yearly top.
- Treasury bond yields edge lower as traders rush to bonds with mixed feelings.
Risk appetite appears mostly sluggish during early Tuesday even as traders from Tokyo return after a long weekend. The reason could be linked to the cautious mood ahead of the US data, as well as mixed headlines about the key risk areas.
While portraying the mood, the S&P500 Futures dribble at the highest level since April 2022, down 0.10% intraday near 4,565 by the press time, whereas the US 10-year and two-year Treasury bond yields cling to mild losses near $3.80% and 4.73% in that order. It’s worth noting that the US Dollar Index (DXY) remains pressured amid cautious optimism, as well as due to Monday’s downbeat data, whereas commodities and Antipodeans print mild gains of late.
That said, Friday’s hawkish Fed concerns couldn’t last long as the previous day’s US data fail to defend the optimism surrounding the world’s largest economy, earlier favored by the top-tier consumer-centric numbers. On Monday, New York (NY) Empire State Manufacturing Index for July eased to 1.1 from 6.6 prior and 0.0 market forecasts. The data failed to inspire the US Dollar Index (DXY) sellers initially before weighing on the DXY, probing Friday’s recovery backed by the upbeat prints of the University of Michigan’s (UoM) Consumer Sentiment Index and consumer inflation expectations for the said month.
On a different page, US Climate Envoy John Kerry is in China to mark another effort by Washington to improve the Sino-US ties, following the early July visit by US Treasury Secretary Janet Yellen. That said, the US policymaker met China’s top diplomat Wang Yi early Tuesday while saying, per Reuters, “Our hope is now that this could be the beginning of new cooperation to solve the differences between us.”
Elsewhere, the policy hawks at the European Central Bank (ECB), Federal Reserve (Fed), Bank of England (BoE), Bank of Canada (BoC) and Swiss National Bank (SNB) are all likely to run out of steam late amid economic fears and hence underpin the cautious optimism.
Moving on, US Retail Sales for June, expected to rise to 0.5% versus 0.3% prior, will be crucial to watch for clear directions. Also important will be the US Industrial Production for June, expected -0.1% versus -0.2% prior, as well as the US-China headlines and the bond market moves as Japan returns from a long weekend.