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US stocks seen higher, spotlight turns to Fed

U.S. stocks were tipped to open higher on Tuesday, recovering some of the previous day's falls, ahead of the start of the U.S. Federal Reserve's two-day meeting, a raft of earnings and data.

China remained in focus, with Shanghai's benchmark stock market closing down 1.7 percent after another volatile session that saw shares shed as much as 5 percent. China's securities regulator said on Tuesday that it had launched an investigation into Monday's selloff, when stocks fell more than 8 percent.

Still, global markets appeared to brush off the turmoil for now with Asian stocks outside China edging higher and European stock markets opening in positive territory.

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U.S. stock futures, meanwhile, traded firmer in morning London trade, with Dow Jones industrial average futures climbing more than 100 points.

The blue-chip Dow Jones stock index shed 0.7 percent on Monday, while the tech-heavy Nasdaq slipped 1 percent following the volatility in China, persistent selling in commodity markets and lackluster earnings.

Tuesday's earnings calendar has a strong line-up of firms that includes Ford, Twitter, UPS and Buffalo Wild Wings.

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The July services Purchasing Managers' Index (PMI) is expected at 9:45 a.m. ET, followed by the July consumer confidence index at 10:00 a.m. ET.

The Case-Shiller 20-city home price index rose 4.9 percent in May from the same period last month, matching April's pace. The gain missed expectations for a 5.6 percent increase.

The Fed, meanwhile, kicks off its two-day meeting later in the day. Although markets are not anticipating any changes to interest rates this week, any hawkish comments from the central bank's post-meeting statement on Wednesday could fuel talk of a September rate move.

U.S. interest rates have been held near zero since the global financial crisis, but with the economy in recovery mode, investors have tipped 2015 as they year the Fed will deliver its first rate hike in almost a decade.

Federal Reserve Bank Chair Janet Yellen.
Getty Images
Federal Reserve Bank Chair Janet Yellen.

"Last time, (Fed Chair Janet) Yellen, spooked the market with speculations that a rate hike will most probably will take place in September and this is pushing the dollar higher and making the dollar denominated commodities rout even worse," Naeem Aslam, chief market analyst at AvaTrade, said in a note.

"Nonetheless, the Fed will surely bring the Chinese selloff and commodity rout under their consideration and will tailor their response accordingly," he added.

The plunge in Chinese stock markets has raised concerns about financial stability and a protracted economic slowdown in the world's second biggest economy that would have knock-on effect on global growth.

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Elsewhere, merger and activity news could be in focus after news that aircraft parts manufacturer Honeywell said it would buy the utility consumption meter business of U.K.-listed Melrose Industries for $5.14 billion.

In London, oil giant BP unveiled a second-quarter replacement cost loss of $6.3 billion Tuesday, and warned that low oil prices are here to stay. The replacement cost measure takes into account changes in the price of oil and is used across the industry to report earnings.