Yields drop the most in a week, S&P 500 Futures down too amid risk-off mood

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  • US 10-year Treasury yields extend Wednesday’s pullback from monthly peak.
  • S&P 500 Futures, Asia-Pacific stocks are down too.
  • Virus woes escalate amid fears of fresh variant that spreads faster, resist vaccines.
  • Fed rate hike concerns, China headlines and covid updates may entertain traders during a short-trading day to end the week.

Having witnessed sluggish trading on the Thanksgiving Day holiday, market sentiment sours during early Friday, taking down the US Treasury yields and stock futures at the latest.

That said, the US 10-year Treasury yields drop 5.5 basis points (bps) to 1.589%, extending Wednesday’s pullback from the monthly peak. Additionally portraying the risk aversion are the downbeat prints of the S&P 500 Futures, -0.40% intraday, as well as the Asia-Pacific stocks.

While fading the Fed-led boost to the monthly high, the Treasury yields seem to fear from the latest COVID-19 headlines that drive the market’s rush to risk safety. Also challenging the yields could be a lack of directives after Wednesday’s mixed US data and soft PMIs.

Poland, Germany and France struggle to defend their “no national lockdown” concerns whereas chatters of a faster spreading virus variant add to the risk-off mood. The word also spreads that the recently found version of the coronavirus, with a formal name of B.1.1.529, is linked to South Africa and is immune to the vaccines.

Other than the COVID-19 woes and fears that the Fed will hike the benchmark rate at the wrong time, the Sino-American tussles also weigh on the market sentiment amid a light calendar day. the US-China tension gradually escalates following the virtual meeting between US President Joe Biden and his Chinese counterpart Xi Jinping. While China’s inability to perform the phase one deal terms sparked initial fears of another round of the US-China tussles, issues relating to Vietnam and Taiwan recently added fuel to the fire. The US invites Taiwan to one of its home events and keeps its warships moving in the troubled water surrounding the Asian nation, which in turn hints at political jitters with Beijing.

Furthermore, China’s struggling firms like Evergrande and Kaisa also challenge the risk appetite.

Looking forward, a lack of major data/events can push the traders to extend the latest risk-off mood amid virus fears. Also important are the headlines relating to the US-China relations and the Fed moves. It’s worth noting that the US markets will close early on Friday.