Following a stronger session in Asia overnight, the FTSE powered higher on the open. Last week fears of a global recession amid the ongoing US – Sino trade war dragged on sentiment. As the new week kicks off risk appetite is improving; stocks are in demand amid increased optimism over US and China reaching a trade deal and as investors anticipate stimulus measures to sure up slowing economies:
1. Germany has said that it will increase spending should the German economy fall into recession. Given that Germany contracted in the second quarter and data points to further softening in the third quarter a recession is looking increasingly likely.
2. China also joined the stimulus chorus, unveiling measures to reduce borrowing costs for companies to sure up its slowing economy.
3. Adding to the optimistic atmosphere, President Trump also expressed optimism over reaching an agreement with China. This would address what is considered the root cause of the global slowdown.
4. Central bankers will be meeting at the end of the week at the annual Jackson Hole meeting in Wyoming. The meeting takes place to a backdrop of financial markets flashing recession warning signs, adding to rising pressure for further support from central banks.
Yields ease, gold falls and Fresnillo drops to the bottom of the FTSE
Last week’s safe haven trade is unwinding, gold, bond yields and Japanese yen are seen moving lower in early trade on Monday. Precious metal miner Fresnillo, which has benefited royally from gold’s impressive rally over the past few weeks was tracing the precious metals lower in early trade, topping the FTSE loser board.
FTSE levels to watch:
The FTSE is clawing back some of the lost ground from last week. Whilst the index is moving higher, it still remains below its 50, 100 and 200 sma on the 4 hr chart; a bearish chart. The Index would need to break above 7245 and then 7305 to negate the bearish outlook.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.