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STOXX Europe 600 up 0.4%
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Miners lead advance, autos down
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U.S. stock futures inch higher
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AS PEAK RATES BECKON, IS CONVICTION IN CREDIT RISING? (1030 GMT)
Recent hawkish pauses and mixed economic data may at first appear to complicate the overall rate outlook, but for Brad Tank, chief investment officer fixed income at Neuberger Berman, it only brings more conviction to the firm's views.
"We also see this fundamental rates and inflation backdrop increasingly reflected in the dispersion of bond issuers’ cash flows and credit spreads, rewarding issuer selection."
As peak rates approach, he is exercising more caution on duration, and focusing in on quality and cash-flow resilience in credit.
"Are there more rate hikes to come? Quite possibly. Are there a lot more rate hikes to come? We think not."
Nevertheless, he says the current uncertainty over how further rate hikes will actually play out feels very different to 12 months ago when inflation was soaring, or even three months ago amid the banking crisis.
He points to declining volatility in bond markets as evidence for rising certainty.
He also says selectivity on credit is becoming increasingly important in light of impending peak rates - which will come as a relief to some, but keep the pressure on if they stay high.
"Second-quarter reporting revealed growing dispersion in corporate earnings growth and cash flows that can be obscured if you look only at what’s going on at the index level."
Energy and gaming are two sectors that are managing to sustain cash flows while healthcare and media broadcasting are two that are struggling, Tank adds.
"In addition, there are pockets of high-quality credit where valuations are attractive due to stressed sellers such as U.S. regional banks: we see opportunity in mortgage-backed securities and other securitized debt."
(Lucy Raitano)
CHEMICALS: WORST MAY BE OVER BUT TOO SOON TO GET EXCITED (1001 GMT)
Profit warnings from European chemical makers like Lanxess and Victrex have been among the top market-moving events over the past several weeks.
The big share price drops that followed provided a clearing event that seemingly tempted some investors to buy on weakness as the second-quarter reporting season approaches.
But for Morgan Stanley, it's too early to get excited.
"While we share the view that we have now moved past the trough... we fail to share the same optimism," say Charles Webb and other analysts at the U.S. bank.
They cite a few reasons to remain selective, including an elusive recovery in demand in China, abundant supply, and accelerating negative pricing dynamics.
"We expect to see incremental self-help and capital discipline measures to be announced alongside 2Q23 reporting. The latter may potentially lower incremental downward risk to 2H23/1H24 earnings estimates, before a demand-led rebound may become visible," they say.
As a result, lacking big catalysts, MS says investors will likely focus on order book trends and signs of inflection in macro data.
(Danilo Masoni)
MINERS PROP STOXX UP ON CHINA STIMULUS BET, AUTOS DRAG (0824 GMT)
Bets of fresh stimulus from top metals consumer China is giving a nice boost to miners in Europe helping the STOXX Europe 600 rise slightly and offsetting headwinds from a rising pound that weighed on London exporters.
The region-wide benchmark was last up 0.2%.
The Basic Materials sub-index, which tracks global mining stocks, led the way, up 1.4%, followed by construction and Real Estate. China-exposed luxury stocks rose too with LVMH rising 1.5%.
The FTSE 100 fell 0.1%, led lower by heavyweight export oriented stocks as the pound surged to a 15-month high against the dollar.
Autos were a weak spot. Dowlais tumbled 7% after Citi said electrification could pose a risk for the automotive engineering company and put pressure on its margins. The broker initiated coverage of Dowlais with a sell rating.
Here is your opening snapshot.
(Danilo Masoni)
EUROPE EYES POSITIVE START (0640 GMT)
European shares were expected to rise at the open on Tuesday, supported by a positive close on Wall Street and hopes for a fresh round of easing in China following measures to support the country's battered property sector.
EuroSTOXX50 and FTSE futures rose 0.6 and 0.1% respectively.
S&P 500 contracts also edged up ahead of inflation data on Wednesday that could signal a further moderation in price pressures in the United States and support expectations for an end to the Federal Reserve's tightening cycle.
Meanwhile in Germany, inflation rose in June, interrupting a steady decline since the start of the year.
Traders were also awaiting updates from Wall Street banks later this week to kick off the U.S. earnings season.
In European corporate news, Daimler Truck raised its profit and revenue guidance due to an easing of supply chain constraints and stronger demand in its core markets. Its shares rose 4% in early Frankfurt trade.
Eyes also on chip company Nordic Semi, diagnostic firm Ambu and commercial property firm British Land following results. A big LNG supply agreement could help energy firm Centrica.
(Danilo Masoni)
AS YIELDS AND THE YEN GO, SO GOES THE DOLLAR (05556 GMT)
A day of calm after last week's clear-out in the bond market and investors are back to trading near-term rate expectations.
Traders in Asia nudged both yields and the dollar a whisker lower on Tuesday, with an eye on Wednesday's U.S. inflation data.
Two-year and ten-year Treasury yields are back below 5% and 4%, respectively.
News aided stocks, with Alibaba extending gains on hopes that a $984 million fine for Ant Group signalled the end of a years-long crackdown that has hammered the Chinese tech sector.
U.S. Treasury Secretary Janet Yellen's visit to Beijing seemed also to meet low expectations, with few signs that testy relations are getting better but also little suggestion they're getting worse.
The yen is in the driver's seat in foreign exchange markets, as investors pull back on high-yielding bets in emerging markets that have been funded by cheaply borrowed yen.
Such trades are placed by selling yen for dollars and then dollars for emerging-market currencies such as the peso or the real, so reversing them requires selling dollars for yen. The yen has risen to the strong side of 141 per dollar for the first time in three weeks.
Elsewhere in Asia the extension of a support package for China's property sector helped Hong Kong developers. The Hang Seng rose 1.5%.
The events calendar is relatively bare until U.S. CPI data on Wednesday and U.S. earnings later in the week, although final German inflation figures and British jobs data are due later on Tuesday.
Economists expect UK unemployment to hold at 3.8%, which is likely to add upward pressure on wages and interest rates.
That seems to be lending speculative support to the British currency, with sterling longs near their highest in five years and the spot price touching a 15-month top in the Asia session.
Key developments that could influence markets on Tuesday:
British jobs data
Final German CPI
(Tom Westbrook)
