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

Dolan

To the extent that worries about pricey tech stocks and rising

AI capex spending were partly behind last week's market

shakeout, Microsoft's ( MSFT ) quarterly update should prove a key moment

later on Tuesday, just as the Federal Reserve's latest policy

meeting gets under way.

Markets run the gauntlet of three major central bank

decisions this week, the July U.S. employment report on Friday

and four U.S. megacap earnings reports.

With U.S. election uncertainty as the backdrop, trepidation

ahead of the week's events understandably held most major macro

prices in check. U.S. stock futures were

marginally higher ahead of Tuesday's bell, while Treasury yields

and the dollar nudged up too.

Caution ahead of the Fed's policy decision on Wednesday -

which is preceded by a possible tightening jolt from the Bank of

Japan earlier that day - may muffle the initial reaction to

Microsoft's ( MSFT ) report.

But a key question for investors will be whether growth in

Microsoft's ( MSFT ) Azure cloud-computing business has picked up enough

to justify the billions of dollars being spent on artificial

intelligence infrastructure. Its stock was down a touch, out of

hours on Tuesday.

Meta follows with its earnings release on Wednesday

and Apple ( AAPL ) and Amazon ( AMZN ) report the day after.

For the next 36 hours or so, however, it will be hard to

disentangle the issues surrounding the so-called Magnificent

Seven megacaps from the Fed meeting - where signals on a first

interest rate cut as soon as September are expected.

With disinflation resuming, Fed attention is shifting to the

other side of its twin mandate and what appears to be a

significant cooling of the labor market.

Friday's national payrolls report for July comes too late to

influence Fed thinking this week. But policymakers will today

get a glimpse of just how much the jobs market was loosening

last month with the latest JOLTS job openings numbers.

Treasury markets remained calm - helped by Fed easing hopes,

a cut in government borrowing estimates for the coming quarter

and falling crude oil prices.

The U.S. Treasury said on Monday it expects to borrow $740

billion in the third quarter, $106 billion lower than the April

estimate and mainly due to lower redemptions in the Federal

Reserve System Open Market Account and a higher cash balance at

the beginning of the quarter.

The government will offer more details on the refunding

schedule on Wednesday morning.

Even though the election fogs the windscreen before then,

analysts are already crunching the Treasury numbers to see what

it may mean for the debt ceiling, which is due to be reinstated

on Jan. 2 unless Congress suspends it again. As it stands, the

estimated cash balance for December makes it likely government

could last until July or August before running out of cash.

With OPEC+ oil ministers due to meet again on Thursday and

political tensions in OPEC member Venezuela rising after a

disputed weekend election result there, crude oil prices ebbed

to their lowest in six weeks and clocked their deepest

year-on-year loss since Feb. 1 - almost 5%.

Elsewhere, the yen weakened into the BOJ meeting and

sterling was steady ahead of the Bank of England's likely

tight decision on a first UK rate cut on Thursday.

The euro rose on mixed bag of economic numbers. Even

though Germany recorded an unexpected contraction of its economy

in the second quarter, and some German states exceeded inflation

expectations for July, the euro zone economy as a whole actually

beat forecasts as GDP in the bloc climbed 0.3% in Q2.

And it was a heavy earnings diary in Europe too.

Standard Chartered ( SCBFF ) jumped almost 6% after the

UK-based bank announced a $1.5 billion share buyback, its

biggest ever, and lifted its income outlook for 2024.

UK asset manager St James's Place soared more than

20% after outlining a six-year plan to slash costs and revamp

its services, putting its stock on course for their biggest

one-day rise since 2008.

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

markets later on Tuesday:

* US June JOLTS job openings report, July consumer confidence,

Dallas Fed July service sector survey, May house prices

* Federal Reserve's Federal Open Market Committee starts two-day

policy meeting, decision Wednesday; Bank of Japan also holds

Monetary Policy Meeting, decision Wednesday

* US corporate earnings: Microsoft ( MSFT ), Advanced Micro Devices,

Pfizer, Merck, Corning, Proctor & Gamble, Starbucks, Caesars

Entertainment, Arista Networks, Archer-Daniels-Midland, Sysco,

Stryker, Skyworks Solutions, S&P Global, Stanley Black & Decker,

American Tower, Illinois Took Works, Mondelez, Essex Property,

First Solar, FirstEnergy, Howmet, Xylem, Incyte, Zebra, Match,

Live Nation, Ecolab, Gartner etc

(By Mike Dolan; Editing by Kevin Liffey;

[email protected])