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Reports UK

UK stock market commentary (August 06, 2014): 20,000 Russian troops marching towards you is never a bullish sign

August 6, 2014, Wednesday, 05:46 GMT | 00:46 EST | 09:16 IST | 11:46 SGT
Contributed by Capital Spreads

European equities are set to open lower following overnight declines in the US and Asia. European equities managed to claw back some of their recent losses yesterday but it looks as though this dead cat bounce has reached its apex. After the European close, reports of a Russian military build up on the Ukrainian border has spooked markets globally and we are expecting sharp declines on the open. Also adding to the sour mood were comments from Putin himself that Russia should retaliate against the sanctions recently imposed on them last night. The natural conclusion that markets are drawing is of a huge escalation in the Ukrainian crisis and the usual excuse of normal military exercises want wash this time so expect markets to be highly on edge whilst the west tries to decipher Putin’s true intentions.

The conflict in Ukraine seemed to escalate with fresh reports of a build-up of Russian troops on the border making headlines. The story just refuses to go away despite elections in Ukraine and repetitive sanctions adopted by the US and the EU against Russia. And increasing speculation of a possible invasion into Ukraine by Putin’s troops eventually captured markets’ attention with the Dow Jones plunging 120 points yesterday to 16,436.

The shared currency touched a new recent low yesterday, dropping 46 ticks against the greenback to 1.3375, last seen on mid November last year. The fall was sparked by a disappointing number for euro area services which expanded less than initially forecast fuelling ongoing concerns the recovery in the common area could stumble.

With less than a month remaining of the US peak driving season, the oil refinery activity is seen on the decline reflecting a slumping demand for crude. As such the WTI resumed its southward trajectory, effectively erasing the previous day’s rebound, ending the session 84 cents down at $97.58 a barrel.

On one hand the geopolitics has undoubtedly bolstered demand for gold as a safe haven lately but on the other hand we see renewed strengthening in the US dollar which restricted the rally so far. Consequently gold prices were kept in check as was the case yesterday when the precious metal ended just marginally higher at $1287.9.