Spanish and Italian government bonds remained under pressure on Tuesday. Spain’s 10-year yield rose 12 basis points to 7.62 percent and Italy's 10-year yield rose 26 basis points to 6.60 percent.
The rise in yields comes as data for the euro area on Tuesday showed that the region's economy remains in contraction. Markit's flash estimate of the eurozone composite index was unchanged at 46.4 in July, an increase in the services index to 47.6 from 47.1 offsetting a decline in the manufacturing PMI to 44.1 from 45.1.
China's manufacturing sector, though, showed signs of stabilization on Tuesday. HSBC reported that a flash estimate showed that its manufacturing PMI for China rose to 49.5 in July, a five-month high, from 48.2 in June.
Unfortunately, Tuesday's data showed that US manufacturing is moving in the opposite direction. According to Markit's flash estimate, the US manufacturing PMI fell to 51.8 in July, the worst reading since December 2010, from 52.5 in June. Another report on Tuesday showed that the Richmond Federal Reserve's manufacturing index tumbled to -17 in July from -1 in June.
However, while US manufacturing may be turning down, US housing appears to be turning up. On Tuesday, the Federal Housing Finance Agency reported that home prices rose 0.8 percent in May while the real-estate website Zillow said home prices rose 0.2 percent in the second quarter from a year ago, the first year-over-year increase since 2007.