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A look at the day ahead in U.S. and global markets

By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets

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After notching a fifth month of gains for July, Wall St stocks looked set to step back on Tuesday as a deluge of corporate earnings hit this week and poor manufacturing soundings from around the world set a more edgy backdrop.

China’s factory underperformance stood out once again and underlined its struggling recovery – perhaps the main driver of stalling industrial activity everywhere. With markets increasingly impatient at the patchy and underwhelming economic stimulus plans seen from Beijing so far, China stocks fell, bucking Tuesday’s wider Asia stocks rally.

A Federal Reserve survey late Monday showed how more than a year of sharp interest rate increases had weighed on credit to the wider economy in the second quarter – but hopes of ‘peak rates’ worldwide were encouraged when Australia’s central bank unexpectedly paused policy tightening again.

Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in Manhattan in New York City, New York, U.S., October 26, 2020. REUTERS/Mike Segar

Led in part by a resulting recoil in the Australian dollar, the U.S. dollar climbed sharply to its best level in three weeks as the relatively upbeat U.S. economic constellation contrasted with stiffer conditions abroad. 

Chicago Fed chief Austan Goolsbee said on Monday the Fed is now on “the golden path” of bringing down inflation without causing a recession – but added no final decision had been made on September’s policy meeting.

Excess credit tightening after the March bank sector stress appears to have been the “dog that has not been barking,” Goolbee said, and the more restrictive loan conditions he had seen were in line with what Fed policy had intended to engineer.

But with property lending showing up as a particular cause of concern in Fed lending surveys, real estate remains a worry for many investors around the world.

With the Bank of England set to lift UK interest rates again later this week, the latest data showed British house prices fell 3.8% in the year through July – their fastest fall since the aftermath of the banking crash of 2009.

Sterling and UK stocks fell back.

Otherwise, the focus in U.S. hours will be on another sweep of corporate earnings, with chipmaker AMD in focus during a bumper season for semiconductor firms and Caterpillar likely to reflect the more subdued industrial economy by contrast.

Big Pharma also looms large, with updates from Pfizer and Merck. Ride-hailing giant Uber’s stock rose more than 2% before the bell and ahead of its earnings report. 

In the UK, HSBC climbed 2.1% after the lender raised its key performance target, while BP gained 2.2% after the energy giant boosted its dividend by 10%.

With the July U.S. employment report due Friday, traders will also watch closely for the latest U.S. job openings numbers later on Tuesday.

U.S. stock futures and Treasury yields were a touch lower ahead of the open.