European open – Trade, recession, FTSE open fail

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Markets calm as FTSE fails to open

Recession fears are alive and well but Friday is off to a more relaxed start, perhaps a sign that investors already have one eye on their weekend activities after a surprisingly exhausting week.

Source – Thomson Reuters Eikon

This week everyone has become obsessed with the inverted yield curve and whether it means we’re headed for recession or if it’s “different this time”. Of course, it’s always different this time. Although there are good arguments why “this time” that may actually be true.

The problem we have is that if enough people are convinced, it could become self-fulfilling. The reality is that this is just a trend that has been reliable over the last 50 years or so, rather than having any solid foundation. If Trump and Xi miraculously resolve the trade war tomorrow, are we still headed for recession? I would think not and the curve would adjust to reflect that.

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At this stage though, there’s probably more reason to have faith in an indicator like to 2-10 inversion than the US and China bringing an end to this unnecessary damaging exercise. Trump is happy to continue to blame the Fed for any evidence of the trade war hurting the US while both sides seem happy to see this through and accept the consequences.

Investors are more relaxed this morning than they’ve been for the rest of the week but it would be naive to expect it to continue. There’s been plenty of whipsaw action this week so to assume today will remain calm may be asking a bit much.

The FTSE failed to open on time on Friday due to a potential trading service issue. Unfortunately, I don’t think we can blame Brexit for this one but maybe I’ll be proven wrong.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years’ experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.

Craig Erlam







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