US T-bond yields fade bounce off weekly low, stock futures track Wall Street gains

• US 10-year Treasury yields remain pressured amid lacklustre markets.
• Receding fears of Russia, mixed Fedspeak help equities amid DXY weakness.
• US ADP Employment Change will be eyed to forecast Friday’s NFP.

Risk appetite remains sluggish during early Wednesday as traders brace for the key weekly data/events.

While portraying the mood, the benchmark US 10-year Treasury bond coupons struggle around 1.79%, despite bouncing off a one-week low the previous day. However, the S&P 500 Futures rise 0.50% while tracking the Wall Street gains to keep buyers hopeful.

It’s worth noting that the softer US Dollar Index (DXY) helps WTI crude oil but not the gold prices ahead of the early signal to Friday’s US Nonfarm Payrolls (NFP), namely the US ADP Employment Change for January, expected 207K versus 807K prior.

Among the key challenges to the sentiment are mixed comments from the US Federal Reserve (Fed) officials and the recently firmer US data, as well as the US Senate’s procedural voting on China Competition Bill. On the contrary, receding fears of Russia’s immediate invasion of Ukraine join the market’s optimism to overcome the Omicron-linked supply crunch fears.

US ISM Services PMI for January rose to 57.6 versus 57.5 expected, marking the 20^th straight expansion of the manufacturing activity. That said, Atlanta Fed President Raphael Bostic said on Tuesday that there is a "real danger" of inflation expectations drifting from the Fed's 2.0% target to 4% or higher. On the other hand, St Louis Fed President James Bullard said that he thinks it is an open question whether the Fed will have to become more restrictive (i.e. raise rates above the "neutral" 2.0%-2.5% zone). 

Moving on, the preliminary reading of the Eurozone Consumer Price Index (CPI) for January, expected 4.4% YoY versus 5.5% prior, will also be important to watch ahead of Thursday’s European Central Bank (ECB) meeting, not to forget US ADP data.

Above all, Fedspeak and Russia-Ukraine headlines will be crucial for near-term market direction as traders brace for the March rate hike.

Read: It's the end of the month and the Fed continues to confuse