US Treasury yields remain pressured, S&P 500 Futures drop half a percent on sour sentiment

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  • US 10-year Treasury yields seesaw around fortnight low.
  • S&P 500 Futures drop 0.60%, Asia-Pacific shares trade mixed.
  • PBOC announced rate cut, Omicron fears escalate ahead of holiday season.
  • Fed’s Waller renewed rate-hike calls, US Senator Manchin poured cold water on the face of BBB hopes.

Having witnessed a roller-coaster week filled with the central bankers’ actions, global markets stay depressed during early Monday.

While portraying the mood, US 10-year Treasury yields dropped 1.5 basis points (bps) to 1.38%, down for the third consecutive day while S&P 500 Futures drop 0.60% at the latest. Further, Australia’s ASX 200 dropped 0.30% by the press time even as stocks in China traded mixed.

The reason could be linked to the escalating concerns over the covid variant linked to South Africa, namely Omicron, as well as fresh fears of a Fed rate hike in early 2022. Adding to the bearish catalysts is the latest disappointment for the US Democratic Party members after Joe Manchin rejected the push to vote for President Joe Biden’s Build Back Better (BBB) stimulus.

A 52% jump in the UK’s covid cases and fears of fresh covid-linked restrictions during the Christmas celebrations join chatters over a virus-led death of a New Zealand resident who took Pfizer vaccine. Additionally, New York Times said, “Dr. Anthony S. Fauci, the nation’s top infectious disease expert, warned on Sunday that the extraordinarily contagious Omicron variant of the coronavirus was raging worldwide and that it was likely to cause another major surge in the United States, especially among the unvaccinated.”

Elsewhere, US Senator Manchin’s step back rejects odds for any fruitful discussion on the much-awaited US stimulus during 2021 as Democrats needed all the party votes to progress on the BBB. “West Virginia’s Joe Manchin appeared to deal a fatal blow to President Joe Biden’s signature domestic policy bill, known as Build Back Better, which also aims to expand the social safety net and tackle climate change,” said Reuters.

On the same line were fresh talks over the Fed rate hike in early 2022, triggered on Friday by Fed Board of Governors member Christopher Waller. The policymaker said, per Reuters, “The ‘whole point’ of the Fed’s decision to accelerate the pace of its QE taper was to make the March Fed meeting ‘live’ for a first rate-hike.”

Against this backdrop, the US Dollar Index (DXY) struggles around 96.65, after posting the highest daily close in 2021 the previous day. The risk-aversion wave favors gold prices but weighs on the oil at the latest.

It’s worth noting that a light calendar and holiday mood may restrict market moves looking forward.