On Tuesday, Japan's Nikkei reached a new all-time high, while investors globally were on edge awaiting Federal Reserve Chair Jerome Powell's stance on potential rate cuts, following indications of a cooling U.S. labor market. European markets are expected to open mixed, with EUROSTOXX 50 futures down by 0.2% and FTSE futures up by 0.1%. Meanwhile, S&P 500 futures rose 0.2% and Nasdaq futures increased by 0.3%, mirroring the record closing highs of Wall Street on Monday. The Nikkei surged 2.3% to a new peak, buoyed by semiconductor stocks, and MSCI's Asia-Pacific index excluding Japan nudged up 0.4%, just shy of a two-year high reached the previous day. Taiwan's market also hit a record before experiencing some profit-taking, ending the session down 0.1%. China's main index climbed 1.1%, and Hong Kong's Hang Seng index rose 0.5%.

Powell is scheduled to testify before Congress on Tuesday and Wednesday, with investors betting that recent weak labor market data significantly raises the likelihood of a September rate cut, now estimated at about 80%. "Markets seem optimistic that Powell will adopt a cautious dovish tone, and upcoming CPI data this week should confirm the return of disinflation," commented Shane Oliver, chief economist at AMP in Sydney. "This seems plausible given the softening economic data in the U.S., including Friday's jobs report which was weaker than expected, and rising unemployment."

This week's key economic highlight will be the U.S. consumer price report on Thursday, with June's headline inflation expected to ease to 3.1% from May's 3.3%, while core inflation is forecast to remain at 3.4%. For the rest of 2024, markets anticipate a total of 50 basis points in rate reductions, equivalent to two cuts. In currency markets, the euro stabilized at $1.0825 following Monday's volatile trading, as investors digest the implications of a hung parliament in France, which may lead to political stalemate but alleviates fiscal fears from extreme right or left victories. The U.S. dollar remained near four-week lows at 105.01 against a basket of currencies, providing relief to the struggling yen and yuan.

The Japanese yen steadied at 160.95 per dollar, recovering from a 38-year low of 161.96, while the offshore Chinese yuan traded at 7.2897 per dollar, having strengthened for four consecutive sessions. In fixed income, U.S. Treasuries held steady, with the 10-year yield at 4.2841% after four days of declines, and the 2-year yield flat at 4.6285%, close to a three-month low. In commodities, gold increased by 0.3% to $2,365.69 an ounce after a previous drop. Oil prices declined as the hurricane impacting Texas's key oil production region caused less damage than anticipated, with Brent futures falling 0.2% to $85.54 a barrel and WTI crude down 0.3% to $82.10.