U.S. equity futures traded close to unchanged levels early Tuesday as markets monitored the outlook for interest rates, higher crude prices and renewed military activity involving the United States and Iran.
Investors were also assessing a rise in Japanese government bond yields ahead of several U.S. economic releases, including labour market and manufacturing data.
Wall Street futures flat ahead of economic releases
At 03:40 ET, futures linked to the S&P 500, Nasdaq 100 and Dow were broadly unchanged.
The moves followed declines on Wall Street in the previous session, when higher U.S. Treasury yields and rising oil prices formed part of the market backdrop.
Attention is turning towards Friday’s nonfarm payrolls report, which will provide another measure of U.S. labour market conditions ahead of the Federal Reserve’s September policy decision.
Tuesday’s calendar includes the July Job Openings and Labor Turnover Survey and the ISM manufacturing index.
Japanese 10-year yield moves above 3%
Japan’s benchmark 10-year government bond yield climbed above 3% on Tuesday, reaching that level for the first time since September 1996.
The yield has more than tripled since 2024 as the Bank of Japan has shifted away from its previous ultra-loose monetary policy.
Investors are also monitoring the effect of higher energy costs on Japanese inflation and the potential implications for future Bank of Japan interest rate decisions.
Higher yields on Japanese government debt could affect the relative attractiveness of overseas assets for domestic investors, although the extent of any resulting changes to investment allocations remains uncertain.
Brent trades above $91 as markets monitor Strait of Hormuz
Crude prices extended their gains on Tuesday amid continued military exchanges involving the United States and Iran.
At 01:02 ET, Brent crude futures were 1.1% higher at $91.51 per barrel, while WTI futures rose 1.4% to $86.99. Both benchmarks had advanced nearly 3% in the previous session.
The latest developments followed U.S. strikes against Iranian military targets on Larak Island and subsequent Iranian missile attacks on U.S. military facilities in Jordan.
President Donald Trump has also raised the possibility of further military action against Iran.
Markets are monitoring the developments for their potential effect on energy supplies and shipping through the Strait of Hormuz.
Tanker incident adds to shipping concerns
The Strait of Hormuz remains a focus because of the volume of crude oil and petroleum products transported through the waterway.
According to the United Kingdom Maritime Trade Operations agency, a tanker was struck by three unidentified projectiles while leaving the strait on Monday.
The duration and scale of any disruption to commercial shipping remain uncertain. Any sustained reduction in energy shipments through the waterway could affect global oil supplies and prices.
Higher energy prices could also contribute to inflation through transportation, production and consumer energy costs.
U.S. labour and manufacturing data in focus
Investors will receive the July JOLTS job openings report and ISM manufacturing index later Tuesday.
Federal Reserve Governor Michael Barr is also scheduled to speak.
Markets are assessing the possibility of another interest rate increase after Federal Reserve Chair Kevin Warsh recently adopted a more hawkish tone.
Tuesday’s releases and Friday’s nonfarm payrolls report will provide additional economic information ahead of the Federal Reserve’s September interest rate decision.
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