A weekend of sun and sporting success has put everyone in a good mood, with the markets reflecting this. After Friday’s disappointing finish in London, US markets were able to recover their form, and this has put the FTSE 100 on the front foot. Major indices have managed to shrug off the Fed-induced volatility, but with the minutes of the latest meeting due out on Wednesday we could be in for a rude shock.
The week has got off to a quiet start in both economic and corporate terms, but a general easing of fears about Greece and Portugal has helped to calm nerves. Given the history of the eurozone crisis however, the problems in these two countries could easily be back to haunt investors before the summer is out. BP is feeling the heat from compensation claims for the Deepwater Horizon spill, and while it might have a point about some of the claims the company’s view is unlikely to win it many friends in Washington.
Earnings season kicks off with Alcoa this afternoon, with the usual excessive amount of importance attached to this company. One update does not determine the tone of the entire earnings season, but at least it will provide a view on how the aluminium market is faring, an important element given ongoing worries about the Chinese economy. The rally from June lows means that highs for the S&P 500 above 1650 are now the next target, but Wednesday’s minutes could easily pull the rug out from underneath the current move higher.