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Reports UK

UK stock market commentary (August 01, 2014): Good data good for the bears

August 1, 2014, Friday, 05:55 GMT | 00:55 EST | 09:25 IST | 11:55 SGT
Contributed by Capital Spreads

European equities are set to continue their slide as yesterday’s painful session has given traders a hangover. A multitude of negative cues from Russia, weak economic and corporate data, the Fed and even Argentina all conspired to strip away any reason to hold risky assets.

Although markets are set to open lower this morning, there may be a brief pause in the carnage ahead of the US jobs data but it’s likely to be an anxious wait. The ‘worst’ case scenario that is getting the bulls trembling is a repeat of last month’s data releases. If we have another surprise sharp drop in the unemployment rate and another forecast smashing payrolls figure then there can be no doubting the trajectory of the US economy is on the up. Unfortunately for the bulls, this will only solidify the speculation that monetary tightening is on its way sooner rather than later.

Inflation in the euro area surprisingly slowed last months to 0.4%, the weakest level in nearly five years keeping the ECB under pressure to kick start growth through monetary easing. Strange enough after the steep sell off in equities, investors did not rush into the safety of the greenback with the EUR/USD pair dropping just 7 pips to 1.3389.

The sharp plunge in the US equities, almost panic-like easily spilled over into the energy complex and in turn sent the WTI crude prices $1.78 down to $97.66. Undoubtedly in the background there were the results of the weekly oil inventories report released the previous day which showed that demand for gasoline slipped on a stronger dollar.