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Reports UK

UK stock market commentary (August 05, 2014)

August 5, 2014, Tuesday, 05:25 GMT | 00:25 EST | 08:55 IST | 11:25 SGT
Contributed by Capital Spreads

European equities are set to perk up on the open dragged higher by solid gains in the US. However, the positive start belies the true sentiment because the consensus seems to be all over the place at the moment. Europe was mixed yesterday, the US was solidly higher but Asia is trading weak? Nothing has materially changed sine last week and everything that was weighing the bulls down is still firmly wrapped around their necks. The down move may have stalled and some markets have had a modest up tick but traders are already framing this as a text book dead cat bounce.

The US stocks resumed their advance yesterday rebounding 58 points to 16,552 on the back of another better than expected results for corporate earnings. In particular, Berkshire Hathaway led the pack but reassurances form Europe that Portugal’s banking system will not get deeper into trouble, also added to the shift in mood.

Ahead of the European Central Bank meeting this week investors shorted the common currency some more, pushing the EUR/USD pair 10 pips down to 1.3421. Thus, Portugal’s rescue of Banco Espirito Santo eased concerns over the wider banking industry with President Mario Draghi seen as loosening the monetary policy further.

Rising tensions in Iraq where Islamic militants are gaining ground including control of two oil fields has triggered a rebound in oil prices pushing the WTI 73 cents higher to $98.40. Energy investors might have realised that last week’s sharp drop was probably too much given the geopolitical risk which if anything increased.

A rally in the US equities hit gold prices again which dropped $6.1 to reach $1282.5. However, rising violence in Middle East and Ukraine could boost demand for safe haven which in turn should benefit the precious metal.

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