Morning Bid: Fed in the spotlight as Warsh faces Congress

A look at the day ‌ahead in European ​and global ​markets from Gregor Stuart Hunter

Asian markets are crumbling and Brent Crude is bubbling around $85 per barrel as U.S. Fed Chair Kevin Warsh prepares to give testimony ‌to Congress over the next two days. No pressure, then.

Speaking before the ⁠U.S. House Financial Services Committee, Warsh is likely to field questions on the central bank's plans for its ‌balance sheet. Hawkish comments this week ‌by Fed Governor Christopher Waller have boosted the market odds of more rate hikes this year — perhaps as soon as later this month.

That prospect, combined with a third consecutive ​night of strikes by the U.S. military against Iran and the possibility of the U.S. imposing a 20% fee on cargo ships passing through the Strait of Hormuz, roiled ⁠markets in Asia on Tuesday.

Brent futures climbed to their highest since mid-June, while S&P 500 e-mini futures eased 0.2%.

MSCI's broadest index ​of Asia-Pacific shares outside Japan was down 1.2%, led by declines for shares in Taipei and Seoul.

Despite the ongoing bear market in South ​Korea — at one point on Tuesday the Kospi had ‌logged its worst two-day decline since the start of the Iran war — it remains one of the world's best-performing indexes this year.

In early European ⁠trades, pan-region futures were down 0.9%, German DAX futures fell 0.9% and FTSE futures slid 0.4%.

Chinese stocks fared better than most after data showed exports surged in June, buoyed by demand for chips and ⁠data centre computing power to fuel the global AI boom.

Meanwhile in Tokyo, Finance Minister Satsuki Katayama said Japan ​may consider adjusting the strategy of the giant Government Pension Investment Fund if the investment environment changes sharply, several days after saying officials would seek ways to encourage greater investments in domestic financial assets. She ‌gave few further details, however.

Elsewhere, as the Ebola outbreak intensifies, the Trump administration on Monday said it was blocking American citizens in the ‌Democratic Republic of Congo from travelling back to the U.S. on commercial flights, according to a White ⁠House official.

Key developments that could influence ‌markets on Tuesday:

Company earnings:

JPMorgan Chase, ​Bank of America Corporation, Goldman Sachs, Wells Fargo, Citigroup

Economic data:

U.S.: June CPI and core inflation

Debt auctions:

Germany: 2-year government debt

(Reporting by Gregor Stuart Hunter; Editing by ‌Kate Mayberry)

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