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UK stock market commentary (April 25, 2014): Bears on the prowl

April 25, 2014, Friday, 07:24 GMT | 03:24 EST | 11:54 IST | 14:24 SGT
Contributed by Capital Spreads

European equities are set to head lower on the open as recent gains look to have put in a short term top. Markets have been stuck in a range for while now and as we approach the top, the bears have once again warranted that the current economic outlook and geopolitical tensions should cap any further gains.

Tensions in the Ukraine appear to be ratcheting up again what with Kiev launching operations against pro-Russians on one side and Moscow flexing its muscles with more large scale exercises on the border. With both sides continually drawing red lines ever closer to each other, traders are getting concerned that someone is about t to plunge over one of them.

Everything was fine until the US markets opened for trading – a fairly heavy sell off ensued. This time the upbeat economic data was overturned by increasing tensions in the Ukraine. Strong earnings reports from Apple and Caterpillar helped the Dow Jones maintain some dignity – it remained unchanged at 16500.

The Euro has been sitting at around the same level for a couple of weeks now. Resistance is seen at 1.3860 and support at 1.3790. Despite the anticipated market more on Thursday following comments from Mario Draghi, the Eurodollar is still sitting right in the middle of the range. It closed up ten pips at 1.3830.

As the Russian military begins drills on the Ukrainian border to further fuel an already tense situation, the future supply of energy is understandably put into jeopardy resulting in a hike of the oil price. West Texas Intermediate is less sensitive to the current circumstance than Brent Crude and would have made more gains but for the recent news of increasing stockpiles. US crude closed up 6 cents at $102 having lost over 2% this week.

Gold jumped quickly to reverse losses on news of difficulties in Eastern Europe. Investors quickly lost their risk appetite and headed for the safe havens that have been so deserted recently. Upbeat data had previously given the dollar a boost and thus gold a decline but this all reversed in the afternoon. The precious metal closed up $10 at $1292.

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