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

Dolan

Monday's Wall Street bounce saw some relief precede the first

two earnings reports from the "Magnificent 7" megacap stocks,

while U.S. Vice President Kamala Harris looked set to replace

Joe Biden as Democrat candidate for November's White House race.

A volatile couple of weeks for politics and stock markets

sees attention switch back to quarterly earnings on Tuesday,

with Google-parent Alphabet and Tesla

updating after the bell today.

Last week's sudden rotation out of Big Tech into small caps

raised questions about just how high the earnings bar now is for

pricey market behemoths, with stocks such as Netflix stumbling

despite beating forecasts and chipmakers sideswiped by

geopolitics.

A standback look at the earnings season so far offers more

solace.

Some 81% of those that have reported to date have beaten

estimates, with overall annual profit growth for S&P500 firms

still tracking a punchy 11% - slightly ahead of pre-season

assumptions. Slower annual revenue growth at 4.5% is also

slightly ahead.

And while this pace is expected to dip in Q3, standing

forecasts are for a re-acceleration into 2025.

With the S&P500 rebounding more than 1% on Monday in its

best day in six weeks, the Information Technology index

climbed 2% - topping sectoral gainers and snapping a

four-day losing streak.

The VIX volatility gauge slipped back from

three-month highs.

In a twist ahead of today's updates, Israeli cybersecurity

startup Wiz has ended talks with Alphabet on a

reported $23 billion deal, which would have been the U.S. tech

giant's largest-ever acquisition, according to a Wiz memo seen

by Reuters.

But the election race remains the top talking point.

Less than 36 hours after Biden stepped aside and endorsed VP

Harris, she appeared to have secured the Democratic nomination

on Monday night by winning the pledged support of a majority of

the party's delegates who will determine the outcome at next

month's convention.

While another round of speculation about Harris' pick of

running mate now ensues, markets are already tentatively

re-calibrating election bets.

Although former President Donald Trump is still seen as

clear favourite to return to the White House, online betting

site PredictIt shows the probability of his win has slipped to

60%.

The solidifying of a clear two horse race after weeks of

uncertainty about the candidates has seen Harris' ascribed

probability jump 17 points from last week to some 44% on Tuesday

as her campaign now begins in earnest.

The somewhat cagey election positioning to date has run into

sand as a result, with many of the so-called Trump trades being

pared back slightly.

With another heavy week of Treasury debt auctions kicking

off with a $69 billion two-year note sale on Tuesday, Treasury

yields sensitive to the fiscal implications of the election

remained under wraps. The 2-to-30 year yield curve,

which had briefly turned positive last week, remains inverted.

Bitcoin also slipped back.

The dollar was mixed too, falling back against

Japan's yen on Tuesday as pressure built on the Bank of

Japan to resume monetary tightening there.

Senior Japanese ruling party official Toshimitsu Motegi said

the BOJ should more clearly indicate its resolve to normalise

monetary policy, including through steady interest rate hikes.

The BOJ next sets rates on July 31.

Increasingly correlated in Asia, yen strength came in tandem

with a small bounce in China's yuan too, despite Monday's

surprise interest rate cut from the People's Bank of China.

Trump's draconian tariff pledges may play a part there too.

But Chinese stocks recorded their biggest single-day drop in

six months, demonstrating the fragility of investor sentiment

despite ongoing stimulus efforts.

China's blue-chip CSI300 index closed down 2.1%,

its largest one-day decline since mid-January and ending a

seven-session winning run.

European stocks were mixed on Tuesday, with the euro

retreating after European Central Bank Vice President Luis de

Guindos said new data and macroeconomic projections will help

the ECB better reassess its monetary policy stance in September

- when markets now see its next rate cut.

Back on Wall Street, stock futures were off slightly ahead

of the big earnings reports and with a thin economic diary.

Key developments that should provide more direction to U.S.

markets later on Tuesday:

* U.S. June existing home sales, Richmond Federal Reserve's July

business surveys; Euro zone July consumer confidence

* US corporate earnings: Alphabet, Tesla, Comcast, Texas

Instruments, Lockheed Martin, UPS, GE, GM, Invesco, Visa,

Capital One, Moody's, MSCI, Coca Cola, Kimberly-Clark, Chubb,

HCA Healthcare, Freeport McMoRan, AO Smith, Pentair, Philip

Morris, Avery Dennison, Danaher, PulteGroup, Quest, Seagate

Technology, Sherwin-Williams Enphase Energy, CoStar, Genuine

Parts, Packaging Corp of America

* G20 Finance Ministers and Central Bank Governors meet in Rio

de Janeiro ahead of the G20 Brazil Summit

* European Central Bank Chief Economist Philip Lane speaks

* US Treasury sells $69 billion 2-year notes

(By Mike Dolan; Editing by Sharon Singleton

[email protected])