Wall Street kicks off 2018; BP’s tax hit; Oil up on Iran worries

1. Welcome to 2018: It’s the first trading day of the year on Wall Street and investors are wondering if the market momentum from 2017 can continue into the new year.

U.S. stock futures are mixed in early trading after markets took a slight dip on the final day of 2017.

Over the past year, the Dow Jones industrial average shot up by 25%, the S&P 500 surged by 19% and the tech-heavy Nasdaq index outshone them with all with a stunning 28% gain.

European markets are mostly negative in early trading, though the losses are modest.

Most Asian markets ended the day with gains. The main Chinese indexes had a particularly good day with gains of 1% to 2%. Investors were feeling optimistic following the release of strong manufacturing data in the country.

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2. Tax take: BP (BP) is the latest corporate giant to announce that it will be taking a massive charge in the fourth quarter of 2017 because of changes to U.S. tax rules.

BP estimates it will have to write off about $1.5 billion in credits that it had been planning to use to lower its tax bill in the future.

Major European banks Barclays (BCS), Credit Suisse (CS) and UBS (UBS), plus oil giant Shell (RDSA), also indicated late last year that the new tax rules could cost them between $1 billion and $3 billion each in one-off charges.

Goldman Sachs (GS) forecast last week that changes to American tax rules would knock $5 billion off its profit in the final quarter of 2017. Most of this hit was due to a new so-called “repatriation tax,” a one-time tax on the cash it hold overseas.

Nevertheless, all the companies said that the lower U.S. corporate tax rate — down to 21% from 35% — would ultimately be good for business.

3. Market movers — Oil, U.S. dollar: Crude oil futures are pushing up to hit their highest levels since mid-2015. Oil prices have surpassed $60.50 per barrel in early trading.

“Crude oil prices have rallied to fresh two-and-a-half year highs as political tensions in OPEC member Iran have boosted prices overnight,” explained analysts at Accendo Markets.

Iranian President Hassan Rouhani has been trying to downplay the significance of sometimes violent protests across his country. At least 12 people are dead amidst the biggest challenge to the Tehran regime since mass demonstrations in 2009.

In currency markets, the U.S. dollar continues to weaken. The U.S. dollar index — which tracks the value of the greenback versus a collection of other major global currencies — is down by more than 3% in the last two months. The dollar is particularly weak right now versus the Mexican peso.

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4. Coming this week: Wednesday — Rite Aid (RAD) earnings, Automakers report December sales numbers Thursday — Walgreens and Monsanto (MON) earnings Friday — U.S. December jobs report

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