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Reports UK

UK stock market commentary (August 12, 2014): Russia: dropping aid or artillery?

August 12, 2014, Tuesday, 05:57 GMT | 23:57 EST | 09:27 IST | 11:57 SGT
Contributed by Capital Spreads

European equities are set to ease modestly on the open as the current geopolitical soap opera throws out another twist. There were some solid gains for the European indices yesterday as an apparent easing of the Russian military build up on the border of the Ukraine was seen as the green light for bargain hunters to make an appearance.

However, post the close, NATO has come out with a contradictory statement suggesting that a Russian invasion was a high probability. Reports from Russia Today have said that a ‘humanitarian’ convoy has departed from Alabino, Russia, en-route to Ukraine, but markets are keen to find out what Putin’s definition of ‘humanitarian’ is. Traders are turning cautious though fearing that something has gotten lost in translation and only too clearly remember how much the ‘peace keeping’ force into Georgia in 2008 resembled an invading army.

Wall Street has moved sideways this week, still trading around 16580 levels. After the rally from late last week, investors will be looking for specific data releases to gain some trust back into the markets. It seems as though things are quietening down in the Middle East for now, giving the bulls a chance to regain last month’s losses.

The Euro continued to weaken against the dollar as tensions eased in the Ukraine. Coupled with news that the US is pulling militants from Iraq, the dollar is looking increasingly strong as the Yen also dropped from an almost 3 week high.

WTI crude continued a downward curve despite a good run in the 3 previous days. Oil futures fell as much as 0.3% to $97.80; however investors will be keeping a keen eye on the fuel-supply data released today. The market continues to focus on supply hence the importance of this data release.

As the bounce back in equity markets continued, Gold fell as much as 0.2% trading around $1307. The deteriorating tensions in the Middle East helped fuel the global equities, which in turn weakened the demand for gold as an alternative investment.