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BAD NEWS IS GOOD NEWS FOR MARKETS CRAVING FED 'ROCKET FUEL'

Markets are trying hard to see the bright side of bad news in the United States, anticipating dour data will trigger the economic "rocket fuel" of Federal Reserve interest rate cuts so craved by President Donald Trump.

Odds for a September cut now stand at about 94%, CME Fedwatch showed, from 63% last week. Market participants see at least two quarter-point cuts by year-end.

The odds shot up after disappointing non-farm payrolls data on Friday, causing equity markets to swoon and Trump to shoot the messenger, firing the head of labour statistics and promising to replace her within days.

Institutional independence is turning into a short bet in the U.S. The early resignation of Fed Governor Adriana Kugler will let Trump pick her successor, adding to concerns about partisan loyalty invading the staid world of central bank policy.

Asian markets followed gains on Wall Street, with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS up 0.4%. South Korea's Kospi .KS11 stood out with a 1% jump, while Vietnamese shares traded near a record high.

Data today from the region's two biggest economies showed resilience in their service sectors in the face of headwind from Trump's chaotic introduction of tariffs on goods from trading partners.

In Japan, the S&P Global final services purchasing managers' index $(PMI.UK)$ climbed to 53.6 in July from 51.7 in June for the strongest expansion since February. China's services activity last month expanded at its fastest pace in more than a year.

A slew of PMIs for July are due for release today across Europe.

In earnings, the second-quarter U.S. results season is winding down, but investors are still looking forward to reports this week from big names including Walt Disney DIS.N and Caterpillar CAT.N.

Equity futures are pointing to gains in European and U.S. markets, with the pan-region Euro Stoxx 50 futures STXEc1 up 0.13% and the S&P 500 e-minis ESc1 rising 0.14%.

Key developments that could influence markets on Tuesday:

• France industrial output for June

• July purchasing managers indexes in France, Germany, euro zone, Britain

• Europe earnings: Diageo, BP, Deutsche Post, Telecom Italia

• U.S. earnings: Caterpillar, Pfizer, Yum! Brands, Marriott International, Fox Corp

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(Rocky Swift)

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