As the COVID-19 Delta variant and supply chain disruptions persist globally, damage inflicted on business sentiment in Europe's biggest economy could become clear in Wednesday's Ifo German business sentiment index.

And with a Sept. 26 national election about to call time on the Merkel era, the already closely-watched Ifo survey may take on extra significance.

Just a month ahead of the key vote, the centre-left Social Democrats have pulled ahead of Chancellor Angela Merkel's conservatives for the first time in 15 years, according to an opinion poll published on Tuesday.

Economists expect the August Ifo business sentiment index to decline for a second straight month.

The timing of the German sentiment numbers means markets have something to chew over before U.S. Federal Reserve chief Powell steps up to the virtual Jackson Hole podium on Friday.

Although analysts do not expect Powell to give too much away in terms of the Fed's taper timeline, markets are taking no chances -- Treasury yields and the dollar are clinging to tight trading ranges this week.

Stock markets, however have recovered ground from last week's selloff with Asian stocks higher on Wednesday while U.S. and European stock futures are flat to lower.

Elsewhere, U.S. officials have approved license applications worth hundreds of millions of dollars for China's blacklisted telecom company Huawei to buy chips for its growing auto component business, two people familiar with the matter said.

Key developments that should provide more direction to markets on Wednesday:

-U.S. House of Representatives approved a $3.5 trillion budget framework and will vote by Sept. 27 on a $1 trillion infrastructure bill

- Sydney hospitals battle coronavirus as daily infections hit record

- BOJ policymaker warns of uncertain recovery

- Global corporate profits to fall 8% in Q3 after record Q2

- Cevian Capital pushes stake in Aviva above 5%; Klarna reports Q2 jump in transactions value

- UK CBI survey

- U.S. durable goods data Jul

- ECB vice-president Luis de Guindos speaks

- Bank of Iceland meeting

- Earnings: Eiffage, Aroundtown, Grafton, Nederland, Mowi

Graphic: German Ifo business sentiment index: https://fingfx.thomsonreuters.com/gfx/mkt/znvneellepl/Ifo2408.PNG

(Reporting by Dhara Ranasinghe; editing by Sujata Rao)