European open – The end of the road

Six day rally comes to an end

All good runs must come to an end and while this one is hardly one for the history books, it was undoubtedly welcome given the worry that was spreading early last week.

Source – Thomson Reuters Eikon

US equity markets gave up early gains to just about end in negative territory on Tuesday, weighing on Asian stocks overnight and European futures as we head into the open. It brought a decent run to an end, one that started suddenly as investors became more convinced that the Fed would cut interest rates sufficiently and ease slowdown fears.

It seems we’re dealing with a very emotional investor at the moment, the way we’re so suddenly swinging between such optimism and pessimism on the basis of such minor actions. A lot seems to hang on how many rate cuts we’ll see from the Fed and to be honest, I think market expectations are too high so we may be setting ourselves up for disappointment.

The rebound may be providing some near-term comfort as we continue to reassure ourselves that everything is ok and the Fed will come to the rescue but I’m not sure that’s healthy, accurate or warrants the kind of bounce we’ve seen over the last week. Then again, a successful Trump/Xi meeting later this month may negate the need for such a significant u-turn from the central bank.

Economic Calendar

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
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.