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Reports UK

UK stock market commentary (April 15, 2014): Traders dilema

April 15, 2014, Tuesday, 05:18 GMT | 01:18 EST | 09:48 IST | 12:18 SGT
Contributed by Capital Spreads

European equities are set to open flat as they’re caught between two competing poles of sentiment. On the one hand, pulling traders towards the bullish camp is the recovery taking place in the US. Its resilience and ability to shake off shocks like the weather should be a good indicator for the global economy. However, arguing for a more bearish stance, right on Europe’s doorstep is the Ukrainian tinderbox that has the possibility to flare up into an incident of unimaginable size.

Closer to home the economic outlook remains murky. Whilst the alarm bells of deflation on the continent have been sounding for a while, today’s expected 7th consecutive decline in the UK CPI is sure to get some speculating that we are in for the same fate. Although deflation is supposed to be negative for stocks, in a roundabout way it could be bullish. Pressure is already mounting on the ECB to fire off some QE bazookas and the last time the UK got down to around these levels of inflation the BoE actually did, although that was more of a coincidence rather than a direct attempt at staving off deflation.

The Dow Jones industrial average rose 146 points almost 0.9 percent on Monday, recovering from its sharp fall last week. The boost in stocks came from stronger than expected retail data that helped put the mind of some traders at ease given the current situation in the Ukraine. The rise in the Dow was also spurred on by solid earnings from Citigroup which reported its net income for the first quarter up 4%.
The dollar has a strong session with U.S retail sales shooting up in March however EUR/USD remained fairly unchanged in Monday’s trading session with concerns still looming over the geopolitical landscape in the Ukraine. The EUR/USD has also been finding support from recent declines in US yields.

Despite rising concerns over the Ukraine, West Texas Intermediate declined by as much as 0.8% hitting a session low of $103.36 amidst speculations of increased inventories in the US. The commodity fell from its 6 week high levels with stockpiles estimated to have expanded by 1.5 million barrels last week, in what would be its 12th gain in 13 week.

Gold continued its three week climb on Monday with the precious metal being fuelled by the increased hostilities in Eastern Europe. Gold’s safe haven appeal came to the rescue of investors once again as it climbed as much as 0.7% to $1327.10 an ounce. Monday proved to be spot gold’s fourth session of gains in 5 days after reaching two month lows earlier in the month.