S&P 500: Futures consolidate gains below 3,100 after posting best quarter since 1998

• S&P 500 Futures probe two-day winning streak while easing from one-week high.
• Escalating tension between the US and China, rising coronavirus fears question bulls.
• Today’s FOMC minutes, US data become the key for near-term direction.

S&P 500 Futures recedes from one-week top to 3,085 amid the initial hours of Tokyo trading on Wednesday. The risk barometer closed the second quarter (Q2) with the best gains since 1992. However, traders seem to reassess the earlier risk-on mood at the start of the third quarter (Q3).

China’s passage of Hong Kong security law adds fuel to the Sino-American tension. The Trump administration canceled the special trading status of Hong Kong after Beijing’s refrain from respecting the global ire. In a reaction, the dragon nation not only threatened retaliation but also raised bars for US Secretary of State Mike Pompeo’s efforts to keep unilateral sanctions on Iran. Also weighing on the market’s mood could be the surge in the US coronavirus (COVID-19). As per the latest updates from Reuters, the US coronavirus cases rose by over 40,000 for a 5th time in the past 6 days.

It’s worth mentioning that the hopes of further stimulus and upbeat US data joined the quarter-end rebalancing to propel the US equity benchmark in recent days.

Amid all these catalysts, the US 10-year Treasury yields gain 2.4 basis points (bps) to 0.677% whereas Japan’s Nikkei 225 struggles for direction around 22,300 as we write.

Moving on, China’s Caixin Manufacturing PMI, expected 50.5 versus 50.7 prior, could offer immediate direction to the market after the official gauge of Chinese manufacturing activity offered positive surprise the previous day. It should, however, be noted that the economic calendar will be the key during the US session as it comprises of FOMC minutes, ISM Manufacturing PMI and ADP Employment Change.

Other than the economics, updates concerning the pandemic, signals for the global policymakers' actions to combat the second wave and China’s hard stand on many instances will also be the key to follow.