MARKET WRAPS

Watch For:

U.S. Factory Orders for June; Canada Manufacturing PMI for July.

Opening Call:

Stock futures edged higher Tuesday as investors awaited more corporate earnings reports to assess the business climate.

A strong spate of corporate results has helped bolster optimism that stocks can continue to grind higher following an already strong rally this year. Investors say continued support from central banks and economic data that still shows growth will further support equities.

"It has been a pretty strong earnings season and that justifies the medium-term positive view that we have on stocks," said Justin Onuekwusi, head of retail multiasset funds at Legal & General Investment Management. "Earnings typically always beat the average analyst estimate, but for the second quarter in a row, they are coming in above the highest estimates, which is pretty unprecedented."

Eli Lilly, KKR, ConocoPhillips and Marriott International are among the companies slated to report before the market opens. Lyft, Activision Blizzard and Amgen will post results after markets close.

Investors are also monitoring a number of factors that could add volatility to markets and limit the pace of the rally in broader markets. An increase in Delta-variant Covid-19 cases has raised concerns about the global economic recovery stalling, and a recent regulatory clampdown in China caught some investors by surprise last month.

Durable-goods orders figures are due at 8:30 a.m. Eastern.

Overseas, the pan-continental Stoxx Europe 600 added 0.2%.

Technology stocks in China and Hong Kong had another turbulent session after a state-owned newspaper criticized online gaming as "opium for the mind," stoking fears of further tough action from Beijing.

Shares in China's Tencent Holdings, NetEase and Bilibili all plunged, before regaining some ground after the article disappeared from the paper's website.

Shares in Tencent, which said Tuesday that it would introduce stricter curbs on younger users' gaming time, stood 6.1% lower in Hong Kong, while the city's Hang Seng Tech Index declined 1.5%.

Hong Kong's broader Hang Seng Index drifted 0.2% lower, while Japan's Nikkei 225 fell 0.5%, and Australia's S&P / ASX 200 dropped 0.2%.

"Sentiment has been hit by this commentary suggesting that online gaming might be an area China will target in the future," said Edward Park, chief investment officer at U.K. investment firm Brooks Macdonald. "It means this risk won't go away. It is hard for investors to trade that risk," he added.

Forex:

The view that the yield advantage of U.S. assets over euro-area assets should cause the euro to weaken versus the dollar isn't justified, Commerzbank said.

"If it were true, the euro would have to depreciate steadily against the dollar," Commerzbank currency analyst Ulrich Leuchtmann said.

Long-term real inflation-adjusted Treasury and German Bund yields haven't been at comparable levels since 2012, he said.

The risk of significant euro appreciation is higher than the risk of significant depreciation as EUR/USD trades well below long-term equilibrium levels, he said.

The pound should rise in tandem with U.K. bond yields if the Bank of England cements market expectations for an interest rate rise next year in a policy decision Thursday, Bank of America said.

"The rates markets appear well placed in expecting the first hike in May 2022 (+15 basis points), consistent with our own projections," BofA analysts said. "For GBP, this sets the bar for market expectations, and we think the burden of proof is whether the BOE validates market pricing for the removal of policy accommodation in the coming year."

If the BOE can achieve this while sounding "hawkish," the pound should benefit from higher nominal and inflation-adjusted real bond yields, the analysts said.

Bonds:

In bond markets, the yield on the 10-year Treasury note ticked up to 1.189% from 1.173% Monday, its lowest closing level since February.

Commodities

Oil prices swung higher. "The oil market continues to alternate between concerns about tight supply on the one hand and about looming demand outages on the other," said Commerzbank's Barbara Lambrecht.

Despite swinging over the last week, crude has remained in a relatively tight range in recent sessions, with Brent only 0.2% lower than it was this time a week ago.

While worries over fresh Delta-variant-driven restrictions and the health of the Chinese economic recovery have worried investors in recent days, DNB Markets's Helge Andre Martinsen pointed out that Bloomberg's survey of OPEC production shows compliance with cuts at a record level for July.

LME three-month copper futures edged up 0.2% to $9,638 a metric ton after falling for the third day in a row Monday--despite the fact that labor disputes are still ongoing at one of the world's biggest mines, Chile's Escondida.

Concerns about economic growth and the rise of the Delta variant of the coronavirus in Asia have dragged down copper in recent days, said Marex Spectron's Anna Stablum.

Gold prices in London were down, with price moves having been calm in recent days. While a weaker dollar boosted gold last week, that move seems to have paused for now.

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08-03-21 0615ET