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Stock futures contracts tied to the three major indices were up roughly 2% on Tuesday morning, putting Wall Street on track to begin a holiday-shortened week higher amid bargain hunting for beaten-down stocks. Last week, the Federal Reserve announced its highest rate hike in 28 years to rein on sky-high inflation, which, coupled with signs of slowing economic activity, triggered concerns that such an aggressive tightening will drag the world's largest economy into a recession. Investors now brace for further volatility in equities, with Fed Chair Jerome Powell set to testify before Congress Wednesday and Thursday. On the data front, existing home sales should provide additional clues about the economy's health.

European equity markets continued their recovery on Tuesday, as investors took advantage of lower valuations while assessing more aggressive central banks and the possibility of a recession. On Tuesday, Germany's BDI industry association cut the German GDP forecast to 1.5% in 2022 from an over 3.5% before the war in Ukraine saying that a return to pre-crisis levels is not expected before the end of the year at the soonest.

The FTSE 100 gained 0.5% on Tuesday, extending a 1.5% rise on Monday supported by gains in miners and oil stocks. UK investors are monitoring the beginning of a rail strike, expected to be the biggest in 30 years, after late talks over a pay dispute failed to break the impasse. Rail workers were offered a pay rise of 3% while inflation closes on 10%, along with pension cuts and demands for longer working hours, more than 40,000 members of the Rail, Maritime and Transport Workers (RMT) union are due to walk out. Among single stocks, British online supermarket and technology group Ocado lost almost 5%, after it said it would boost its liquidity by over $1 billion to fund its growth. Meanwhile, easyJet said it would buy 56 Airbus A320neo aircraft.,/p>

The CAC 40 index was sharply higher to trade above the 6,000 level on Tuesday, after added political risk from President Macron’s failure to secure and parliamentary majority pressured French stocks to underperform its European peers to start the week. Investors continued to weigh on recession fears as the ECB reaffirmed its intention to start using its tools to bring inflation to its 2% target level, while emphasizing flexibility to keep yield spreads at a minimum. The tech sector was among the top gainers in the session, with Capgemini and STMicroelectronics both adding over 2%. The energy sector higher, with Air Liquide up more than 3% after it signed a long-term agreement with Dutch Vattenfall for offshore wind capacity under construction.

The FTSE MIB index was 1% higher to hover around the 22,220 level on Tuesday, continuing its rebound from 16-month lows touched last week after ECB President Lagarde emphasized that the central bank will incorporate flexibility, if warranted, to the start of the tightening cycle next month. The heavyweight financial firms in Milan extended their rally after signals of tighter policy plunged the sector earlier this month. Banco BPM rose 3%, while Intesa Sanpaolo and UniCredit were 2.8% higher. Meanwhile, Leonardo jumped nearly 7% after its electronics arm DRS agreed to a complete takeover of Israeli radar producer RADA.

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