But the rates, currency and commodities complex is riffing heavily off further signs of a sharp U.S. factory slowdown.
While an economic stumble at this stage could be a double-edged sword for near-record high stocks – twinning the earnings implications with the higher chance of lower Federal Reserve rates – the push-pull could continue up to this week’s key employment report at least.
S&P500 futures are back in the red ahead of Tuesday’s open, with stock losses across most of Asia and Europe today too.
On Monday, the ISM’s latest U.S. manufacturing survey showed a deeper contraction in May activity than forecast, amplifying similarly stark readings from Chicago’s equivalent factory poll late last week and signs of an erosion of household spending in April to boot.
The combination has been enough to drag the Atlanta Fed’s real-time “GDPNow” estimate back down as low as 1.8% – from as high 3.5% a week ago and more than 4% in mid-May and its lowest reading all year.
The week’s big labor market soundings get underway later on Tuesday with April job openings data.
Full-year Fed rate cut expectations have now crept back above 40 basis points (bps) – almost 10 bps higher than a week ago.
Both driven by and feeding off a post-OPEC slide in crude oil prices – itself a casualty of the manufacturing anxiety – 10-year Treasury yields fell back to their lowest in almost three weeks. Oil prices snowballed further on Tuesday to their lowest since Feb. 6 – bringing year-on-year gains back below 2% for the first time in three months.
And the 25 bps pullback in 10-year yields over the past week has been enough to zap the newly re-emerged “term premium” on long-term debt holdings back below zero again.
