S&P 500 Futures, US 10-year Treasury yields drop amid risk reset

• S&P 500 Futures slip below 2,950, US 10-year Treasury yields drop over one basis point.
• Fresh updates on Aussie-China tussle, a rocket attack in Baghdad’s green zone check previous risk-on sentiment.
• Markets cheered news of virus cure, further stimulus during the week’s start.
• Fed Chair Powell’s testimony will be the key.

S&P 500 Futures decline to 2,946, down 1.4 points or 0.05% whereas US 10-year Treasury yields slip below 0.73% while marking 1.6 basis points (bps) of a fall during the initial Asian session on Tuesday. The risk barometers are likely to have hit by the latest headlines concerning Aussie-China tension and missile attack in Baghdad’s green zone.

China confirms 80.5% tariffs on Australian barley during its latest anti-Aussie move. The dragon nation banned imports of four meat processors from Australia during the last week. China’s anti-trade steps are likely retaliation to the Aussie PM Scott Morrison’s push for an investigation into the virus outbreak. However, the world’s second-largest economy defies any such claims. Even so, Australia’s Agriculture Minister recently said that there is no trade war with China.

Additionally, unconfirmed reports of a rocket attack in Baghdad’s Green Zone also seem to have capped the market’s previous risk-on sentiment.

It’s worth mentioning that reports of success during the initial trials of Moderna’s coronavirus (COVID-19) drug as well as signals of increased stimulus from the Fed, BOE and Europe contributed to the market’s optimism the previous day.

Also likely to have added to the optimism could be increasing odds that China is back to pre-virus conditions and is set to increase the commodity consumption.

Looking forward, trade/virus updates will remain as the key but the Fed Chair Jerome Powell’s testimony shouldn’t be missed. The event at 14:00 GMT will be closely observed for further clarification on the US central bank’s outlook for additional stimulus as well as negative rates.