- US stock futures gained Tuesday, as investors looked for the robust 2Q earnings season to roll on.
- Investors weighed concerns the spread of the Delta coronavirus variant and its potential impact on economic growth.
- Criticism of Tencent in China dragged the stock down and raised fears of further regulatory pressure.
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US stock futures gained on Tuesday as investors weighed healthy second-quarter earnings reports against concerns about the spread of the COVID Delta variant and its impact on economic growth.
Markets pointed to a return to strength at the open, with S&P 500 futures up 0.37%, Dow Jones futures 0.49% higher, and Nasdaq futures rising 0.14%, at last check at 6:39 am E.T.
Investors appeared to be boosted by a string of robust corporate earnings and the positive progress made by the Biden administration's infrastructure bill. A fresh slate of quarterly financial updates lies ahead Tuesday, with Eli Lilly, Fiat Chrysler, BMW and Marriott on the docket.
Concerns about the fast spread of the Delta variant in the US and China were rising, as investors assessed the potential for a slowdown in global economic growth associated with higher COVID-19 cases and more lockdowns.
"With a number of US states reinstating mask mandates and tightening restrictions, the optimism of a few weeks ago is now being replaced by doubts as to how resilient the recovery we've seen so far this year can remain, as we head into the autumn and the weather starts to get colder," Michael Hewson, chief market analyst at CMC Markets, commented.
Key Asian equity markets closed lower Tuesday as an increase in COVID cases led to renewed or extended restrictions in the region. Tokyo's Nikkei 225 lost 0.5%, and the Shanghai Composite declined 0.47%.
Fears about renewed regulatory pressure in China hit markets on Tuesday after a Chinese state-run media outlet described online gaming was "spiritual opium" and "electronic drugs" on Tuesday, prompting fears that Beijing may go after online entertainment providers in another crackdown. The stock price of entertainment heavyweight Tencent fell as much as 10%.
"After the last few weeks, even oblique warnings from authorities are ignored at your peril, and it seems that regulatory risk is alive and well in China still," Jeffrey Halley, senior market analyst at OANDA, said.
European markets started the session higher, building on Monday's gains built on upbeat manufacturing and other economic data. Frankfurt's DAX was up 0.14%, London's FTSE 100 gained 0.34% and the Euro Stoxx 50 inched 0.16% higher.
The yield on the US 10-year Treasury note rose to 1.199%, up 2.7 basis points. Bonds rallied and yield dropped in the previous session after US manufacturing data came in weaker than expected. Investors are watching for signs of a pullback in economic growth that might shift the Federal Reserve's view of when and whether to taper its asset purchases.
Oil prices edged higher, recovering from losses prompted by demand concerns linked to COVID-19 restrictions. Brent crude was up 0.48% at $73.24 per barrel, while WTI crude gained 0.46% at $71.59 per barrel.