Sentiment in Asian and European equity markets has improved as jitters surrounding technology stocks have subsided, and higher bond yields are providing a boost for financial shares, says Saxo Bank's head of equities strategy Peter Garnry.

The second-quarter earnings season is getting under way, and Danish insurer Tryg's second-quarter pretax profits beat market expectations, while results from PepsiCo are perhaps the highlight for later in the day (due at 1000 GMT).

“Sentiment is strengthening in Europe and Asia post last week’s nervousness around technology stocks,” says Garnry.

Yields are still ticking higher, and that is adding a tailwind for global financials, says Garnry. “We are short-term bullish on this sector.”

Hawkishness among central banks is pushing up yields, and, if that continues, it will lift valuations among insurance companies, Garnry says.

Macroeconomic signals from China are mixed, but strong signals from Australia could be an indication that the Chinese economy is improving rather than weakening, though "the jury is still out," Garnry says.

The forex markets have been mainly quiet ahead of US Federal Reserve chief Janet Yellen's two-day testimony to Congress, which begins Wednesday.

But EURCHF was seen heading up through 1.10 for the first time in a long time, and that could open the way for the 1.12 area, says Saxo Bank's FX strategy chief John J Hardy.

Higher yields are also driving Swiss franc weakness, Hardy says. (Read also Hardy's latest FX Update here on TradingFloor.)

The Bank of Canada is widely expected to raise interest rates by a quarter point on Wednesday, which would make it the first G10 currency to follow the Fed's tightening.

The macroeconomic calendar for Tuesday is thin, though two Bank of England speakers and the Fed's Lael Brainard, a dove, are slated to speak.

In the commodities markets, the selloff in crude oil prices has stabilised ahead of a key US inventory report due on Wednesday, and WTI is finding support below $44/barrel, says Saxo's head of commodities strategy Ole Hansen.

Gold is "putting up a bit of a fight," Hansen says, noting, however, that gold is still some distance away from relative safety above $1,230/oz.

Silver potentially holds the key as it looks stretched and oversold after the latest leg down, Hansen says. "A recovery in silver could provide some support to gold."

“Crop conditions continue to deteriorate,” says Hansen.

Saxo Bank's Kim Cramer Larsson will hold a webinar on technical analysis at 1330 CET (1130 GMT) today. (Sign up here on TradingFloor.)