Oil hits year high

FTSE heads lower at start of week

European stocks have started the week on a weaker note despite a strong close on Wall Street Friday and a rally in Asian stocks Monday morning. With the US and China seemingly within reach of a trade agreement and the Federal Reserve abandoning its tightening policy, US stocks are now not far off record highs.

US earnings season to show contractions

The litmus test of whether the rally in US stocks can be sustained will come with this earnings season which is expected to show the first set of corporate contractions in more than two years. JP Morgan Chase and Wells Fargo will kick off the reporting season Friday followed by Citigroup early next week when corporate reports will start flooding in in earnest.

The Fed is also likely to continue steering a supportive course for the US economy, even more so because President Trump has criticised the central bank and its chairman over last year’s rate hikes. Though technically independent, the balance in the Fed has been slowly shifting as Trump has nominated new candidates to the board of the central bank and the process is still ongoing with Trump’s latest nomination. The Fed’s last policy meeting minutes will be released Wednesday but are not expected to hold many surprises as the bank has already signalled that there will be no more hikes this year.

Oil hits year high

Brent crude has breached $70/bbl, trading at the highest level this year as tensions in Libya escalated resulting in 21 people killed and as many wounded.  The turmoil in the oil-rich North African country is adding to the already tightening oil market where supplies are curtailed because of OPEC production cuts and US sanctions on Iran and Venezuela. US-traded WTI is also higher but far behind at $63.5 as the US remains well-supplied with its own production.