Market Analysis

The major U.S. index futures are currently pointing to a sharply higher open on Tuesday, with stocks likely to see initial strength following the mixed performance seen in the previous session.

U.S. stocks ended mixed on Monday after a somewhat volatile session as some disappointing economic data from the U.S., Europe and China weighed on sentiment, prompting investors to largely stay cautious.

Despite early weakness, the Dow ended slightly up at 32,223.42, gaining 26.76 points or 0.1 percent. The S&P 500, which managed to emerge into positive territory around mid-afternoon, failed to hold at higher levels and settled with a loss of 15.88 points or 0.4 percent at 4,008.01. The Nasdaq closed with a loss of 142.21 points or 1.2 percent at 11,662.79.

Data showing a contraction in China's industrial output and a report showing an unexpected contraction in New York manufacturing activity in May hurt sentiment.

A downward revision in EU growth forecast by the European Commission and data showing German wholesale price inflation hitting a record high weighed as well.

Energy stocks moved higher as crude oil prices rose sharply on supply concerns and amid bets energy demand in China will pick up once the Covid lockdowns are lifted.

Shares of Eli Lilly gained 2.7 percent after the drugmaker said it has bagged the nod from the regulator for tirzepatide that helps treat adults with type 2 diabetes.

Spirit Airlines shares soared 13.6 percent after JetBlue Airways launched a hostile takeover bid for the discount carrier. JetBlue shares drifted down more than 6 percent.

Chevron, Verizon, Merck, Walgreens Boots Alliance, Caterpillar and IBM gained 1 to 3 percent.

Boeing, Walt Disney and Salesforce.com shed 1.7 to 2.5 percent. American Express, Cisco Systems, Goldman Sachs, Intel and Apple also ended notably lower.

Data from the National Bureau of Statistics showed that China's industrial output contracted 2.9 percent year-on-year in April, missing expectations for an increase of 0.4 percent and down from 5 percent in March.

According to a report released by the Federal Reserve Bank of New York, manufacturing activity unexpectedly contracted in the month of May, with the general business conditions index plunging to a negative 11.6 in May from a positive 24.6 in April. A negative reading indicates a contraction in regional manufacturing activity.

Economists had expected the index to slump to a positive 15.5, which would have still indicated growth in the sector.

Commodity, Currency Markets

Crude oil futures are slipping $0.23 to $113.97 a barrel after jumping $3.71 to $114.20 a barrel on Monday. Meanwhile, after rising $5.80 to $1,814 an ounce in the previous session, gold futures are climbing $14.80 to $1,828.80 an ounce.

On the currency front, the U.S. dollar is trading at 129.50 yen compared to the 129.16 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0539 compared to yesterday’s $1.0434.

Asia

Asian stocks finished broadly higher on Tuesday after reports that Shanghai was seeing a strong recovery from COVID cases, with plans in pace to ease lockdown restrictions in stages.

The upside, however, remained capped by uncertainty over the shift in Fed policy and lingering concerns about elevated food and fuel costs.

China's Shanghai Composite index rose 0.65 percent to 3,093.70 after Shanghai reportedly hit a milestone of three days of zero community transmission, which could see the city ease out of its grueling lockdown.

Hong Kong's Hang Seng index jumped as much as 3.27 percent to 20,602.52, with Chinese tech stocks leading the surge.

Japanese shares extended gains for the third day running on optimism over the relaxation of Shanghai's lockdowns and the easing of China's corporate crackdown. The Nikki average rose 0.42 percent to 26,659.75.

Inpex soared 5.6 percent and Japan Petroleum rallied 3.6 percent following an overnight rally in oil prices on expectations for a recovery in Chinese demand.

Brewer Asahi Holdings plunged 10.9 percent and advertising giant Dentsu plummeted 6.2 percent on disappointing financial results.

Seoul stocks rose sharply as investors looked to buy quality companies at discounted prices. The Kospi average gained 0.92 percent to settle at 2,620.44.

Market bellwether Samsung Electronics, No. 2 chipmaker SK Hynix and battery maker LG Energy Solution all rose about 2 percent.

Australian markets rose for a third straight session, though overall gains remained limited after minutes from the RBA's May meeting showed the central bank could further increase interest rates in June.

The benchmark S&P/ASX 200 edged up 0.27 percent to 7,112.50, led by gains in the mining and energy stocks. Tech stocks underperformed, with Block and Xero losing 3.3 percent and 1.6 percent, respectively.

James Hardie Industries lost 3.5 percent after the fibre cement products maker reported annual profit towards the lower end of its forecast range.

New Zealand shares ended a choppy session slightly lower, with the benchmark NZX-50 index closing 0.18 percent lower at 11,137.88.

Europe

European stocks advanced on Tuesday amid expectations of demand revival in top consumer China after Shanghai pledged to gradually ease its Covid lockdown and return life to normal in June.

Investors also cheered data showing that Britain's unemployment rate fell to its lowest since 1974 at 3.7 percent in the first three months of this year.

Separate data showed that the French unemployment rate fell to the lowest rate in 14 years in the first quarter, dropping to 7.3 percent.

Eurozone GDP grew 0.3 percent sequentially in the first three months of the year, up from a preliminary estimate of 0.2 percent and compared with a 0.3 percent rise in the previous quarter, Eurostat said.

The pan European Stoxx 600 jumped 1.6 percent to 440.53 after ending flat with a positive bias on Monday.

The German DAX and France's CAC 40 index both rose about 1.4 percent, while the U.K.'s FTSE 100 was up 0.7 percent.

Strong commodity prices helped lift energy stocks and miners, with BP Plc, Anglo American, Antofagasta and Glencore rising 1-2 percent.

Imperial Brands soared 7 percent as the tobacco giant reported a marginal increase in first-half sales after accounting for its exit from Russia in response to the invasion of Ukraine.

Contour Global jumped as much as 33 percent after U.S. private company KKR agreed to buy the power generation company for 1.75 billion pounds ($2.16 billion).

Industrial gases company Air Liquide Group advanced 1.6 percent. The company has reached an agreement with Toyota Motor Europe and Portuguese bus manufacturer CaetanoBus to develop integrated hydrogen solutions in Europe.

Power group ENGIE soared almost 6 percent after lifting guidance for the full year.

Daimler Truck Holding also jumped around 6 percent. The commercial vehicle manufacturer raised its full-year revenue guidance and backed its margin guidance for the year, despite rising raw materials prices and inflationary pressures.

Asian markets ended mostly higher and U.S. stock futures pointed to a higher open on Wall Street later in the day as investors await earnings from retailers including Walmart and Home Depot.

Germany's 10-year government bond yield hit an almost one-week high above 1 percent after hawkish comments from ECB policymaker Francois Villeroy de Galhau.

U.S. Economic Reports

Retail sales in the U.S. increased by more than expected in the month of April, according to a report released by the Commerce Department on Tuesday.

The report said retail sales climbed by 0.9 percent in April after jumping by an upwardly revised 1.4 percent in March.

Economists had expected retail sales to rise by 0.7 percent compared to the 0.5 percent increase originally reported for the previous month.

Excluding a rebound in sales by motor vehicle and parts dealers, retail sales rose by 0.6 percent in April after surging by 2.1 percent in March. Ex-auto sales were expected to edge up by 0.3 percent.

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of April. Industrial production is expected to increase by 0.5 percent.

The National Association of Home Builders is due to release its report on homebuilder confidence in the month of May at 10 am ET. Economists expect the housing market index to dip to 75 in May from 77 in April.

Also at 10 am ET, the Commerce Department is scheduled to release its report on business inventories in the month of March. Business inventories are expected to surge by 1.9 percent.

Federal Reserve Chair Jerome Powell is due to participate in a conversation before the Wall Street Journal Future of Everything Festival at 2 pm ET.

At 2:30 pm ET, Cleveland Federal Reserve President Loretta Mester is scheduled to give opening remarks before a virtual Cleveland Fed Conversations on Central Banking, Inflation and Monetary Policy: Parallels to and Differences from the 1970s panel.