US stock index futures took sustained losses on Thursday, with the yield of 10-year US Treasury bonds surpassing 4% for the first time since November 2022. This suggests that the Federal Reserve's endless statements about raising interest rates over a longer period of time are finally starting to sway the minds of investors.

Nasdaq futures fell by 0.6% and S&P 500 futures shed 0.5%. The Stoxx 600 index is trading mostly in the red after recouping earlier losses of 0.6%.

Now the focus is on how far interest rates can rise in the US and the eurozone this year. The swap market is now expecting the Fed funds rate to peak around 5.5% as early as September 2023, with some market participants even expecting peak rates to be around 6%. In the eurozone, traders are now forecasting a deposit rate of 4.0% by 2024.

Today's data showed that inflation in the eurozone has declined at a slower pace than expected and that underlying price pressures have hit a new high. This will surely force the European Central Bank to hike rates even higher.

As noted above, US 10-year bond yields have already risen by 40 basis points and settled above 4%. Bond yield will creep higher if the Fed's return to aggressive policy materializes. German benchmark bond yields are now above 2.7%.

Obviously, many investors have already revised their Fed rates forecasts. Now it's just a matter of figuring out when the rates will finally hit their highs. That will determine how much the US economy will contract and how painfully will the imminent recession be, which is anticipated to begin by the end of this year. All of this is reducing risk appetite in markets around the world, with some even expressing concern that a post-pandemic recovery in China could add to global price pressures.

Although the reopening of China is a positive moment for investors, in terms of inflation, it adds cyclical upward pressure because of the huge demand it generates, especially for commodities.

Crude oil, meanwhile, has continued to rise for the third straight day as traders have correlated the potential recovery in demand from China with fears of Fed policy tightening.

On the technical side, the pressure on risky assets continues. The S&P 500 index can recover only if the bulls manage to regain $3,961 and $3,980, opening the way to $4,010 and $4,038. Another key goal for bulls is holding on to $4,064, which will stop the bear market. Only after that, the index could steadily surge upwards to $4,091. If the index slides down amid strong US labor market data and low demand, bulls will have to keep the index above $3,923. Otherwise, it would quickly drop to $3,890, opening the way towards $3,866.