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Reports UK

UK stock market commentary (August 11, 2014)

August 11, 2014, Monday, 05:04 GMT | 01:04 EST | 09:34 IST | 12:04 SGT
Contributed by Capital Spreads

European equities are set to rally sharply as one of the geopolitical flash points eases. Although the West has quickly engaged ISIS in northern Iraq and fears that this could be the start of some long drawn out affair were confirmed when Obama said not to expect this to be solved in a matter of weeks, the heat from the Ukraine/Russia flash point seems to be dying down. Reports that Russia has used the old chestnut of ending ‘military manoeuvres’ to tone down the tension seems to have worked again and markets are breathing a sigh of relief. US markets managed to stage an impressive rally on Friday off the back of the news and overnight gains in Asia are pointing to a firmer start this morning.

A late rally in the US on Friday helped Asian stocks rise this evening coupled with a report that the country’s pension fund removed caps on equity ownership. We had a large sell-off last month, primarily due to geo-political risks however investors will not see this as a bear market, and the sentiment will remain the same. Shares will rise as the U.S economy expands.

The dollar has held gains from last week as traders look for economic data this week to fuel the bulls. Retail sales are expected to grow for a sixth month and with tensions in the Ukraine and Russia subsiding the dollar is looking strong. EUR/USD currently holding it’s level of 1.34.

WTI has risen marginally from Fridays levels as US airstrikes begin to keep the Islamic militants under control. This will surely be an interesting week for WTI oil as data will show whether driving season is still in full flow.

Gold continues to slip further from a 3 week high as investors take stock on the happenings in the Middle East. Although concerns seem to be fading, geopolitical risk still exists, and while this is the case, gold will continue to be supported.