Opening Bell: U.S. Futures Bounce Back; USD Jumps; Bitcoin Stumbles

Stocks in Europe and US futures on the S&P 500, Dow and NASDAQ 100 crawled higher on Tuesday, shaking off the broad selloffs that continued to dampen Asian trade. This apparent positive reversal suggests bears are now hesitant, while bulls are buying the dips.

The pan-European STOXX 600 halted a two-day two-day selloff, helped by bank shares. These benefited from dip buyers' appetite for Monday's selloff, which was sparked by fears of lenders’ exposure to Turkey.

Investors’ newfound confidence tracks the whopping 7.5 percent intraday rebound in the lira. However, the Turkish currency is still more than 30 percent lower in the last two weeks alone.

In the global opening session, Japan’s TOPIX outperformed its regional peers, surging 1.65 percent, boosted by a weakening yen. Any help Japan's export-dependent economy can get during a trade war is sure to boost its corporates, whether on fundamental merit or sentiment.

Meanwhile, a triple economic disappointment in China, with retail sales, industrial output and fixed-asset investment all growing by less than forecast in July, underpinned the need for more policy stimulus in the country, even amid intensifying trade risks.

This could have a dual negative impact on financial markets. First, a slowdown in the world's second largest economy could curb global growth too. Second, there's a risk that any Chinese setback could encourage US President Donald Trump to ramp up his tariffs strategy, heightening global trade headwinds.

Mainland Chinese shares still managed to perform relatively well, as the Shanghai Composite limited losses to 0.18 percent. Hong Kong’s Hang Seng slipped 0.66 percent. South Korea’s KOSPI climbed 0.47 percent. Australia’s S&P/ASX 200 gained 0.76 percent, outperforming once again.

In the US session, the S&P 500 slid 0.4 percent, with Materials losing roughly a percentage point, for a two-day slide of 2.43 percent, in a sign that sectors sensitive to trade tariff jitters are still leading the selloffs.

Technically, while Material SPDR XLB dropped below its rising channel since July, it closed above the support of an exceptionally bullish hammer posted August 2: the bounce demonstrates that demand is still there.

Energy shares underperformed, falling 1.30 percent after WTI crude slipped as much as 2 percent lower. However, the commodity later trimmed losses to 0.36 percent, forming a solid hammer. It was seen 0.82 percent higher at 10.06 GMT today, confirming yesterday’s exceptionally bullish hammer.

The third worst performing sector was Financials (-0.95 percent) amid mounting Turkish contagion worries. Investors feared the crisis could spread to US banks: while these haven't got any direct exposure to Turkey, they're still indirectly exposed via Europe. Still, some analysts think that the selloffs are entirely sentiment based.

Meanwhile, the Dow Jones Industrial Average dropped 0.50 percent and the NASDAQ Composite retreated 0.25 percent.

The Russell 2000 underperformed, editing 0.68 percent lower. While weakness in the Materials sector and the Dow Jones suggests that trade headwinds are still playing on investor mind, the underperformance of small-cap stocks, which are less exposed to those same headwinds, is surprising.

Moreover, domestic companies are not exposed to emerging markets, which are taking a beating from the spillover of the Turkish crisis. Our educated guess is that smaller investors, who count for a large share of smaller-cap stock demand, were put off by the general risk-off mood yesterday and shied away from the market.

Yesterday's risk-off mode prompted a dollar selloff, in contrast with the USD's recent success as both a safe-haven and a growth asset. However, today's more stable market conditions allowed it to jump back to a 14-month high, recouping most of yesterday’s setback, as yields on 10-year Treasurys crossed above the 2.9 percent threshold.

While the rebound helped confirm the greenback's status as the quintessential growth currency, as well as the integrity of its ascending channel, it was seen back below neutral levels at 10.37am GMT.

Bitcoin dropped below $6,000 to the bottom of a descending triangle since February, a little over 2 percent above its June 24, $5,762.9 trough—the lowest since the near-$20,000 December peak.