U.S. Housing Starts for June; Canadian National Railway Co. 2Q earnings; Netflix Inc. 2Q earnings.
Stock futures pointed to a rebound Tuesday, after major indexes tumbled Monday on concerns over the spread of Covid-19 variants and potential setbacks to the economic recovery.
Futures tied to the Dow Jones Industrial Average rose, suggesting a reversal for the blue-chip index that fell more than 700 points Monday in its worst session since October.
Investors have grown concerned over the Delta coronavirus variant, prompting a reassessment of the economy's prospects. Despite this, the three major stock indexes each closed only around 3% down from their all-time highs Monday, underscoring the strength of the rally that powered equity markets in the first half of the year.
"When you get a selloff like we had yesterday, there are certainly going to be some investors who are going to see that as an opportunity to invest for the longer term," said Kiran Ganesh, a multiasset strategist at UBS Global Wealth Management.
"Especially where the 10-year [Treasury] yields have gone, that still points to the default position for investors as long equities, because there are simply very few other options."
Earnings season is under way, with tobacco giant Philip Morris International and insurance company Travelers Companies scheduled to report ahead of the opening bell. Netflix, Chipotle Mexican Grill and United Airlines are slated to post earnings after markets close.
A gauge of housing starts in the U.S. in June is set for release at 8:30 a.m. ET. Economists expect a rise, as prices for materials such as lumber eased amid a limited supply of houses on the market.
The dollar gained as worries about the global economic impact of the fast-spreading Delta coronavirus variant increases flows into safe havens. The DXY dollar index rose 0.1% to 93.0160.
"The price action continues to send an ominous warning signal over the global growth outlook and indicates that market participants are becoming fearful over a more notable slowdown ahead," MUFG Bank currency analyst Lee Hardman said.
The dollar's rise has been reinforced by a trimming of short-seller bets against the currency over the past month, he said.
Cryptocurrencies extended their declines, with bitcoin dropping below $30,000 Tuesday for the first time in a month. It declined nearly 3% from its level at 5 p.m. ET the previous day to around $29,800.
Sterling fell as investors fret over rising U.K. coronavirus cases and scale back monetary policy tightening expectations following remarks from Bank of England policymakers. GBP/USD fell 0.3% to a five-and-a-half-month low, according to FactSet. BOE official Jonathan Haskel said on Monday monetary stimulus wouldn't be curbed in the foreseeable future.
Catherine Mann, who will soon join the BOE, said on Monday the central bank shouldn't withdraw support too early. "Further comments by BOE members and the development of the pandemic following the lifting of corona restrictions in England are likely to be the most important driver for sterling over the coming weeks and might create additional volatility," Commerzbank's You-Na Park-Heger said.
In bond markets, the yield on the benchmark 10-year U.S. Treasury note edged up to 1.200%, after dropping to 1.181% Monday in the biggest daily decline since March.
Government bond yields will remain low in the medium term according to Erste Asset Management, which expects low yields to prevail in the second half of 2021. The backdrop to this is that central banks will keep the money tap open, even as some, above all the U.S. Federal Reserve, consider cautious exit strategies, it said.
"The USA is becoming gradually more likely to taper their bond purchase program once significant progress has been made on the labor market and with regard to inflation," said Erste AM's Managing Director Heinz Bednar and Head of Multi Asset Alexander Lechner.
The European Central Bank's meeting is likely to prove eventful as it incorporates the ECB's new framework into its policy guidance and adjusts itscommunication, said Peter Allen Goves, fixed income research analyst at MFS Investment Management.
The monetary policy statement will "almost certainly" be changed noticeably to account for the new symmetric 2% target, he said. MFS IM doesn't expect a formal change in actual policy this week but sees risks that the meeting will lean toward a dovish stance.
This could manifest itself with firmer intentions for the ECB to be persistent in maintaining favourable financing conditions. This is likely to reinforce the lower for (even) longer view in core market rates as well as provide further support to eurozone government bond spreads, Goves said.
Oil prices also ticked up after tumbling Monday on fears that Covid-19 could curb energy demand again. Brent crude added 0.3%, after dropping 6.8% in its worst daily performance since March. U.S. benchmark West Texas Intermediate also rose 0.3%, after logging its biggest drop since September.
"We sometimes forget that when we've had periods of very strong performance and low volatility, small bumps in the market do feel like they are more than they are," said Shaniel Ramjee, a multiasset fund manager at Pictet Asset Management.
Gold prices rose in morning European trade. Guotai Junan Futures said it doesn't expect significant downward pressure on the precious metal in the near term, in part because of some turbulence in the dollar. Gold traditionally shares an inverse relationship with the dollar.
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