European markets close marginally higher as investors assess economic challenges

U.S. markets opened higher Tuesday as investors returned from the Labor Day holiday.

The Dow Jones Industrial Average was 0.4% higher, while the S&P 500 was up 0.2% and the Nasdaq was flat.

— Karen Gilchrist

British bakery chain Greggs added 7.8% to lead the Stoxx 600 by mid-afternoon trade in Europe

Delivery Hero gained 7.5% after Morgan Stanley upgraded the stock to "overweight" from "equal-weight," citing fast growth and increasing profitability.

At the bottom of the European blue chip index, Uniper fell 4.7% as uncertainty continues for the German utility, a major gas importer, after Russia shut off gas flows to Europe.

- Elliot Smith

Ruby McGregor-Smith, president of the British Chamber of Commerce, has said it is essential that the government publish a plan to help medium and small businesses cope with rising costs this winter.

 "What we absolutely need right now is a scale of support on the scale of Covid," she said.

It comes after Liz Truss won the Conservative leadership election, becoming Britain's prime minister today, amid a number of tough economic challenges — not least the country's cost-of-living crisis. 

— Katrina Bishop

Consumer discretionary stocks will weaken further as tightening financial conditions meet a global energy crisis, according to Peter Garnry, head of equity strategy at Saxo Bank.

Consumer-facing companies are at the limit of the input costs they can pass on, as if they raise prices by 6%, volumes will fall by more than 6%, he told "Squawk Box Europe".

"You are increasingly hearing from consumer companies that they are going to eat into margins over the next year," Garnry said.

— Jenni Reid

The chief executive of German gas giant Uniper has delivered a bleak assessment of Europe's deepening energy crisis, warning that the worst is still to come.

"I have said this a number of times now over this year and I'm educating also policymakers. Look, the worst is still to come," Uniper CEO Klaus-Dieter Maubach told CNBC's Hadley Gamble at Gastech 2022 in Milan, Italy.

"What we see on the wholesale market is 20 times the price that we have seen two years ago — 20 times. That is why I think we need to have really an open discussion with everyone taking responsibility on how to fix that," he added.

Read the full story here.

— Sam Meredith

International benchmark Brent crude prices fell 2.7% by late morning in Europe after OPEC+ agreed a modest supply cut.

European gas prices also fell by around 10%, according to the latest Dutch TTF Gas Futures readings, pulling back from Monday's 30% surge on the back of Russia's halting of gas flows to Europe via the Nord Stream 1 pipeline.

- Elliot Smith

As Liz Truss officially becomes prime minister, questions are being asked about her plans to change how the U.K.'s main finance district – the City of London – is regulated.

Truss' campaign team originally suggested a merger between the big three regulators – Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Payment Services Regulator (PSR) – in the Financial Times last month.

In an email to CNBC, former FCA insider Matthew Nunan asked what the move would achieve.

"If the answer is the reformation of the old Financial Services Authority, what was the question? Or is it simply change for change's sake?"

You can read the full story here.

— Hannah Ward-Glenton

U.S. Treasury yields were higher as market participants awaited a fresh batch of economic data and Treasury auctions following Monday's Labor Day recess.

The yield on the benchmark 10-year Treasury note rose over 7 basis points to 3.265% at around 3:40 a.m. ET, while the yield on the 30-year Treasury bond gained 6 basis points to 3.408%.

The yield on the 2-year Treasury note jumped nearly 7 basis points to trade at 3.466%.

— Sam Meredith

German industrial orders declined by 1.1% in July, data from the federal statistics office showed on Tuesday, below expectations of a 0.5% contraction from a Reuters poll of analysts.

The fall marks a sixth consecutive month of shrinkage as the war in Ukraine continues to squeeze activity in Europe's largest economy, with rising costs and material shortages hampering industry.

- Elliot Smith

Shares of Belgian automobile distribution company D'Ieteren Group climbed more than 9% in early trade to lead the Stoxx 600 after reporting strong first-half earnings, while British retailer Marks & Spencer added 7.5% to lead a broad advance for retail stocks.

- Elliot Smith

Sterling climbed 0.6% against the dollar in early trade on Tuesday after Bloomberg reported that incoming British Prime Minister Liz Truss has drafted plans to freeze energy bills for U.K. households, in a bid to mitigate the country's spiraling cost of living crisis.

The pound was changing hands for around $1.158 shortly after 8 a.m. in London, having slid below $1.15 on Monday.

The report overnight suggested that Truss plans to fix typical household gas and electricity prices at their current level £1,971 ($2,300) per year. British energy regulator Ofgem recently announced an 80% increase to the country's energy price cap from Oct. 1, which would take the cap to £3,548 per year.

— Elliot Smith

The Reserve Bank of Australia is expected to raise interest rates Tuesday by another 0.5 percentage points on the back of a "fully employed labor market, a massive inflation overshoot and the fact that financial conditions are still highly accommodative," Goldman Sachs chief economist for Australia and New Zealand Andrew Boak said.

Boak told CNBC's "Squawk Box Asia" markets do not expect the central bank to soften its position on reining in inflation when it announces its rate decision at 2:30 p.m. Australian Eastern Standard Time.

"I think markets will be particularly sensitive to any sort of signal the RBA is thinking about stepping down the pace of tightening to say 25 basis point increments," Boak said.

"I think key language will be retained around expecting to tighten further over the coming months. But also the caveat that policy is not on a preset path."

There are risks with continued interest rate lifts such as the "disorderly unwind in the housing market" but Boak says "that is not our central scenario."

— Su-Lin Tan

Investors should navigate the ongoing market volatility by getting into ETFs with a long-term growth story, according to one portfolio manager.

"The idea of owning ETF instead of one specific player — you have the whole basket and ride the wave of more capital investment into the cyberspace," John Petrides, portfolio manager at Tocqueville Asset Management, told CNBC.

He names his favorite cyber security ETF, along with two others.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Russian energy minister Nikolai Shulginov said the country will ship more oil to Asia in response to price caps on its oil exports, Reuters reported.

"Any actions to impose a price cap will lead to deficit on (initiating countries') own markets and will increase price volatility," he told reporters at the Eastern Economic Forum in Vladivostok, according to Reuters.

Last week, the G-7 economic powers agreed to cap the price of Russian crude to punish Moscow for its unprovoked invasion of Ukraine. Before the invasion, Russia exported approximately half of its crude and petroleum product exports to Europe, according to the International Energy Agency.

— Natalie Tham

Strategists are urging investors to allocate more of their portfolios to cash during these volatile times, as interest rate hikes mean it's now offering higher yields.

"Cash was king" last month, Bank of America said in a Sept. 1 note, as most asset classes — such as stocks, bonds and even commodities — posted losses.

Here's how to add it to your portfolios, according to the pros.

CNBC Pro subscribers can read more here.

— Weizhen Tan

European markets are set to open in positive territory Monday.

The U.K.'s FTSE 100 index is expected to open 78 points higher at 7,974, Germany's DAX up 58 points at 17,797, France's CAC 43 points higher at 8,050 and Italy's FTSE MIB up 136 points at 33,373, according to data from IG.

There are no major earnings or data releases Monday.

— Holly Ellyatt