Markets Rebound but Gains Are Unconvincing

Despite enduring a difficult start to the week, European indices are mostly trading back in positive territory on Monday as investors look to secure some bargains following last week’s rout.

At this stage, it’s a little early to know whether this morning’s moves mark a bottoming in the markets following what was a dreadful first week – the worst opening week of the year for U.S. indices in history, in fact – or if it’s just a dead cat bounce. At the moment, I’m inclined to assume the latter as the rebound hasn’t really taken off and already, some indices are nipping in and out of negative territory.

Elsewhere in the markets we are still seeing the risk trade in favour, with the yen, Swiss franc and euro lower in the currency markets and bond yields creeping higher. Again though, when compared to last week’s declines in these, today’s gains are marginal which leads me to believe they may be temporary. Particularly if we continue to see selling in China, where stocks once again suffered heavy selling late in the session to end the day more than 5% lower, despite the Yuan finding its feet after the People’s Bank of China fixed the mid-point higher.

Oil markets will remain in focus this week, with WTI and Brent crude having fallen more than 11% last week. The selling has not eased up this morning with Brent down more than 2% early in the session and I’m struggling to find a reason why this will change. All fundamental factors seem to put lower for crude, be it oversupply, the slowdown in China leading to falling demand and the stronger dollar. The case against crude falling below $30 appears pretty weak at this stage, especially when geopolitical risks are being so overlooked.

The S&P is expected to open 4 points higher, the Dow 1 point higher and the Nasdaq 11 points higher.

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

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

Latest posts by Craig Erlam (see all)