A look at the day ahead in U.S. and global markets from Mike Dolan
Further signs of a cooling U.S. economy greet the second half of 2024, with politics dominating headlines on both sides of the Atlantic and Federal Reserve boss Jerome Powell due to speak later on Tuesday.
Financial markets are grappling with a heady mix of critical elections and signs of slowing growth stateside - with France in the middle of a two-legged parliamentary election, Britain heading to the polls on Thursday and betting on the U.S. election going up a gear after last week's TV debate.
While a fresh lift for U.S. technology stocks papered over the cracks again on Wall St on Monday, rumblings in the bond market and a steepening of long-term yield curves perhaps indicate more about the political concerns.
The Institute for Supply Management's June survey showed U.S. manufacturing missed forecasts and contracted for a third straight month, with a measure of prices paid by factories for inputs dropping to a six-month low amid weak demand for goods.
The U.S. economic surprise index is now registering its most negative reading in almost two years, while the Atlanta Fed's 'GDPNow' tracker has ebbed to just 1.7% - its lowest level of the year so far.
While that should encourage hopes for Fed easing this year, there are still some doubts about whether the central bank will execute its first cut before November's election. Futures price less than a 70% chance of a first cut in September.
Speaking at the European Central Bank's annual forum in Sintra, Portugal later on Tuesday, Powell may provide an additional steer.
But in a big week for labor market updates, despite the Independence Day holiday on Thursday, May data on U.S. job openings may be as important later in the session.
Bond markets, too, have other ideas, with President Joe Biden's poor showing in last week's presidential TV debate with Republican challenger Donald Trump and Monday's U.S. Supreme Court ruling on Trump's partial immunity from prosecution cutting the odds on a Trump victory in November.
Political betting markets now show Trump as a clear favorite to return to the White House, along with his promises of more tax cuts and draconian hikes in tariffs.
The fiscal implications of all that are starting to unnerve long-term Treasuries, with 10-year Treasury yields hitting their highest in a month on Monday and the inverted yield curve spread from 2 years to 10 years narrowing to lowest since early May.
The 2-to-30 year yield curve is at its least inverted in almost five months.
That fiscal concern and related curve steepening was also evident in Europe, with the outcome of the French election still in the balance ahead of Sunday's second round.
Although French far right parties, who are also promising tax cuts, look to be shy of an overall majority in the assembly - and with tactical voting among other parties expected to stymie their chances - nerves about the outcome persist.
French stocks gave back about half of Monday's gains earlier and the French-German 10-year yield premium edged back up to 75 basis points from 72 bps early on Monday.
Euro zone inflation eased last month but a crucial services component remained stubbornly high, likely fuelling concern among some ECB policymakers that domestic price pressures could stay at elevated levels.
The euro slipped back from two-week highs to about 1.0710 on Tuesday.
Elsewhere, the dollar was firmer in general - eking out another 38-year high against Japan's yen at 161.74, with no sign of a repeat of April's Japanese intervention to prop the ailing yen.
Stock markets around the world were lower, including in China after a mixed bag of corporate surveys this week.
Japan's Nikkei bucked the trend on the back of the weak yen, gaining more than 1% and hitting the 40,000 level for the first time in three months on Tuesday.
Wall St stock futures were down 0.4% ahead of the bell, and Treasury ticked back lower ahead of Tuesday's open.
Key developments that should provide more direction to U.S. markets later on Tuesday:
* US May JOLTS job openings
* Federal Reserve Chair Jerome Powell (1330GMT), European Central Bank President Christine Lagarde and ECB board members Luis de Guindos and Isabel Schnabel all speak at ECB's annual forum in Sintra, Portugal