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- U.S. economy looks good but Fed remains cautious: Dudley

U.S. economic conditions are "mostly favorable" yet the Federal Reserve remains cautious in raising interest rates because threats loom, New York Fed President William Dudley said on Monday.

Dudley, a permanent voter on rates and a close ally of Fed Chair Janet Yellen, repeated his views in a speech, saying "policy adjustments are likely to be gradual and cautious, as we continue to face significant uncertainties and the headwinds to growth from the financial crisis have not fully abated."

Addressing a conference at the New York Fed, he repeated he was confident that too-low inflation would rise to a 2 percent goal over the next few years, and that "economic conditions have finally warranted the start of U.S. monetary policy normalization."

- Citigroup on Monday downgraded its outlook for the U.S. economy for 2016-2017, saying "the risks are very evident."

* "Our outlook has little potential to be surprised on the upside, but the risks are very evident on the downside."

"Recently revised and incoming data imply GDP will grow by 0.9 percent in (the first quarter) and 1.7 percent for the year," the report noted.

"Despite such tepid growth prospects, we project a slow decline in the unemployment rate to 4.7 percent by end-2016, and 4.5 percent by end-2017." He also said inflation is projected to remain subdued. The Fed has targeted a 2 percent inflation rate as one criterion for raising interest rates.

"We continue to believe there will be only one rate increase this year — likely in September, unless developments stir financial markets and/or dampen further growth prospects. In that event, December or a later meeting would be a more likely date for an increase."

- Oil prices fell sharply in early trade before recovering late in the session. Brent crude fell 0.4% to $42.91 whilst Nymex lost 1.4% to $39.78.

Oil prices edged up in early trading on Tuesday as an oil worker strike in Kuwait cut huge amounts of crude out of the supply chain.

But analysts warned that the disruption would be short-lived and that markets would soon refocus on a global supply glut following the failure on Sunday by major exporters to rein in on oversupply.

A strike in Kuwait by oil workers has cut the country's production to just 1.1 million barrels per day (bpd), down from 2.8 million bpd usually.

Kuwaiti officials said they would be able to increase output despite the open-ended strike, by using crude from inventory stocks and by taking legal action against unions.

Reference: Reuters, CNBC