London mends with a nudge from the Fed

London's FTSE 100 index decided to shake off its Monday blues and rose by 0.6% on Tuesday. Monday's market tumble was courtesy of some dismal U.S. manufacturing and employment data. However, a resurgence in U.S. services sector activity and reassuring comments from Federal Reserve officials helped steady the ship, alongside robust corporate earnings. Meanwhile, in Japan, the Nikkei index pulled a dramatic 180, jumping 8.7% after a 12% drop on Monday. 

San Francisco Fed chief Mary Daly and her Chicago counterpart Austan Goolsbee stepped in. They pointed out two things: One, the data doesn't scream "recession." This is the USA, after all, the land of Chuck Norris. America doesn't do "backwards." Two, the conditions are ripe for the central bank to cut rates and avoid a financial mess. Plus, the ISM services index showed that the U.S. economy still has some pep in its step, which doesn't quite jive with the panic-induced nosedive we saw.

In corporate news, Construction and materials stocks led the rebound, with Keller Group surging 12%. Large banks were also among top gainers, and energy shares rose as oil prices rebounded.

InterContinental Hotels Group enjoyed a 2.5% boost after reporting a 3.2% rise in Q2 revenue per available room. On the downside, Travis Perkins dropped 2% after slashing its annual earnings forecast. As for the economic indicators to watch on Tuesday, keep an eye on German factory orders, UK construction PMI, and EU retail sales.

Things to read today:

• Why global investors find it so easy to sell Japan (Financial Times).
• Made-in-China moves upmarket as a new generation of brands fights economic slowdown (Bloomberg).
• How does China view the US presidential election (Project Syndicate).
• UK’s Reeves Declines to Rule Out Increase in Capital Gains Tax (Bloomberg)