Stock futures are pointing to a bounce for Tuesday, as investors beat back worries over the fast-spreading delta variant of COVID-19, for now.

Elsewhere, regulatory crackdown worries from China have flared up again, with the lucrative gaming industry a potential target this time (see below), and Tencent getting hit hard.

Investors, who have long been told to diversity their portfolios, may be feeling burned these days over exposure to some hard-hit U.S.-listed China stocks — the Invesco Golden Dragon China ETF
PGJ,
+1.79%

is down about 24% so far this year.

Our call of the day from JPMorgan says investors should park worries Beijing’s regulatory actions will spill into other sectors or emerging markets. China will “stop short of changes that cause an economic growth shock,” said a team led by chief global markets strategist Marko Kolanovic.

“We view the risk of further regulatory changes in China as a local rather than global problem. Given the substantial correction in affected market segments, this risk appears to already be priced in and could ease from here, and it poses little threat to our overall risk-on stance in our view,” said Kolanovic in an Aug. 2 note.

Ex-China regulatory risk, “emerging-markets headwinds appear to be lifting as growth, earnings, and vaccination differentials vs [developed markets] are expected to converge,” he said. The team is sticking to an overweight on EM equities as “Chinese stock valuations in affected sectors are now priced at a substantial discount relative to history.”

Begging to differ is former Robeco porfolio manager Jeroen Blokland, founder and head of research at True Insights, who said investors now need a “higher risk premium on Chinese equities.”

“Government interference is not just bad news for Chinese equities. China has a weight of roughly 40% in the MSCI Emerging Markets Index, which has declined by more than 12% since the February peak and has erased all of this year’s gains,” Blokland said in a recent LinkedIn post.

He’s underweight emerging markets versus developed markets, citing an an already unfavorable outlook due to less fiscal stimulus, more of the region’s central banks tightening up, a stronger U.S. dollar and a slow vaccine rollout.

More earnings and game over in China

China gaming stocks, including Tencent
700,
-6.11%
,
NetEase
9999,
-7.77%

NTES,
+2.77%

and XD
2400,
-8.12%

have been hit hard after an article in a news outlet linked to state-run media likened the industry to “spiritual opium” for teens. Tencent has already announced concessions for underage players.

Shares of video-games maker Take-Two Interactive 
TTWO,
-0.12%

are down after weaker-than-expected guidance. Rival Activision Blizzard
ATVI,
-1.03%
,
which has been under fire over an alleged toxic work environment, is slipping ahead of its results due after the close.

Read: Gaming industry faces a tough transition

Drinks giant PepsiCo
PEP,
-0.40%

will sell juice brands including Tropicana and Naked in North America and Europe for $3.3 billion to PAI Partners.

Specialty materials and chemicals group DuPont de Nemours
DD,
-0.53%

is rising after a profit and sales beat and boosted outlook. Household goods maker Clorox
CLX,
+0.17%

is getting pummeled on weak results and lowered outlooks. Results from casino and hotel group Caesars Entertainment
CZR,
-0.98%

and cloud-solutions company Akamai Technologies
AKAM,
-0.85%

are due later.

On the data front, factory orders and auto sales are ahead.

Louisiana and San Francisco have become the latest to re-introduce mask mandates over the fast-spreading delta strain of COVID-19. And all 11 million people in China’s Wuhan province, the epicenter of the original outbreak, will be tested amid a spate of outbreaks.

The markets

Stock futures
YM00,
+0.46%

ES00,
+0.34%

NQ00,
+0.09%

are rising, with gains across Europe
SXXP,
+0.30%

and a mixed day out of Asia. The yield on the 10-year Treasury
TMUBMUSD10Y,
1.193%

is hovering at just under 1.2%. Bitcoin
BTCUSD,
-0.57%

is roughly at $38,500. U.S. Securities and Exchange Commission Chair Gary Gensler hinted that he’s looking for more oversight in a Bloomberg interview.

Read: What new crypto tax rules would mean for average investors and miners

Random reads

Microsoft and other big corporations planted trees to offset carbon emissions. Those forests are now burning.

It’s a bronze on the beam for U.S. gymnast Simone Biles.

Animal cheer from penguins:

And cats:

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