Crude gains help FTSE 100, while markets look ahead to busy week ahead

• FTSE 100 outperforms as US-Iran tensions lift WTI
• Tech earnings and FOMC meeting promise volatile week
• Chinese Evergrande liquidation highlights continued real estate concerns

A mixed start for European markets has seen the commodity focused FTSE 100 outperform as crude seeks to continue its recent recovery in the wake of further escalation over the weekend. A deadly attack on a US position in Jordan claimed the lives of three servicemen, with Republicans putting pressure on Biden to take retaliatory action against Iran itself. Markets patiently await the US response, with any escalation into a direct conflict with Iran posing a significant risk that energy prices surge once again given the country’s control of the Strait of Hormuz. With 20% of the world’s oil passing through that key waterway, Iran continue to hold a trump card that could help avoid any significant direct retaliation from the US.

Today markets the quiet before the storm, with central banks and corporate earnings expected to make this perhaps the most important week in the first quarter. The ever-reliable tech sector has helped drive much of the upside that took all three US indices into record territory last week, but the time has come to justify those lofty valuations. Between Tuesday and Thursday, we see 22% of the S&P 500 report across just five tech names.

Meanwhile, central banks also come into play, with greater clarity expected around a March rate cut from the Fed that remains on the table according market pricing. Between elevated inflation, strong economic growth, and a resilient jobs market, there should be little reason to believe that the Fed will move before the likes of the ECB.

Another busy session for China saw a Hong Kong court order Evergrande to wind down their business, bringing a long-running saga to a close for the worlds most indebted property developer. For many this will mean the loss of huge capital outlays paid for apartments that were never even built. With the Chinese implementing a RRR rate cut, multi-billion stimulus package, and a ban on short selling, there is a clear effort to avoid contagion into a wider crisis for Chinese assets.