Top 5 things to watch on Tuesday

1 . Geopolitical tensions ease

Calm returned to markets Tuesday, but sentiment remained fragile as investors became less anxious about the chances of an all-out conflict between the United States and Iran in the absence of any fresh developments in the standoff between the two countries.

Tehran and Washington have been trading threats since Friday, when a top Iranian military commander was killed in a U.S. airstrike. The attack stoked concerns about all-out war if Tehran retaliates.

“While the risk of conflict has increased, the reality is this is likely to be limited to proxy skirmishes," said Tom Porcelli, chief U.S. economist at RBC Capital Markets. "The risk of a "hot" conflict seems low as Iran is unlikely to respond in such a way that risks a significant escalation from the United States."

2 . Global stocks steady

U.S. stock futures pointed to a slightly higher open, with Dow futures rising 25 points, or 0.1% , S&P 500 futures contract was up a similar amount and the Nasdaq 100 futures was up 0.3%.

The gains came after U.S. equities reversed early losses as strong gains in the tech sector offset geopolitical tensions.

In Europe shares recovered snapping a two-day losing streak, boosted by gains in the tech sector. Asian markets also rebounded overnight after sharp declines.

3 . Oil, gold pull back

Oil prices fell as investors reconsidered the likelihood of disruptions to Middle East supply, with global benchmark Brent crude down 47 cents to $68.47  after earlier hitting an intra-day low of $67.91.

U.S. crude futures were last at $62.86 after falling 1.5% earlier.

Prices had surged during the previous two sessions, with Brent reaching its highest since September while crude rose to the most since April.

Gold prices also eased after scaling a near seven-year peak of $1,582.59 overnight as Middle East tensions cooled and investors booked profits.

4 . Automakers in focus

British automaker Rolls-Royce (RR.US) reported surging sales on Tuesday, giving some comfort to a sector that has been hit by slowing global demand. Sales at the luxury automaker jumped 25% in 2019 to a new record high, sending shares of Rolls-Royce owner BMW (BMW.US) higher.

In contrast, shares in Aston Martin (AML.US) plunged after it warned its annual core profit would plummet more than 45% from last year, citing weak demand in Europe.

Meanwhile, U.S. electric car maker Tesla (TSLA.US) said Tuesday it has started work on building Model Y electric sports utility vehicles (SUV) at its $2 billion Shanghai factory, marking a new milestone for the company's first foreign car plant.

5 . U.S. data eyed

The U.S. is to release trade data followed by figures on factory orders and the ISM non-manufacturing PMI.

Surveys of service sectors out overnight showed an improvement in the U.S., U.K. and EU, raising expectations that the closely watched ISM index of U.S. services will also show strength.

In the Euro Zone, data showed that the annual rate of inflation rose to 1.3% in December on the back of higher food prices, moving closer to the European Central Bank’s 2% target.

A separate report showed that Euro Zone retail sales jumped by 1.0% in November and were 2% higher from a year earlier.

Read more:

• USA ADP Nonfarm Employment Change: 202K vs 160K
• Iran response was ‘too fast and too furious’ on the U.S. airstrike
• USA – ISM Non-manufacturing PMI: 55.0 vs 54.5
• Noise: How to Overcome the High, Hidden Cost of Inconsistent Decision Making
• EUR Eurozone – Consumer Price Index: 1.3% vs 1.3%