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Reports UK

UK stock market commentary (August 15, 2014): Putin about to turn current rally into a dead cat bounce?

August 15, 2014, Friday, 10:41 GMT | 05:41 EST | 14:11 IST | 16:41 SGT
Contributed by Capital Spreads

European equities are set to edge higher on the open as yesterday’s momentum keeps pumping. When it comes to news, at least economic, bad news has resumed it good connotations. Fears of a European recession and deflationary slump have been welcomed by markets now that the case for quantitative easing looks irrepressible.

Markets also seemed to take Russian President Vladimir Putin’s address in the Crimea as a sign of a de-escalation of tensions in Ukraine. Although markets pounced on the part where he said that he didn’t want war or confrontation, they also seemed to shrug off the conditional part of his speech were he did say that they do have armed forces in their arsenal of options if need be. Considering that overnight we have had reports that Russian military vehicles, not the aid convoy, have rumbled across the border into Ukraine, let’s see how committed Putin is to his earlier statement.

US equities continued to rally today after Putin showed reconciliatory signs in his speech given yesterday in Crimea. The geopolitical sentiment has overshadowed economic news in recent days and yesterday was no different as the Dow Jones reached a 2 week high of 16730 (+0.4%).

A Weak German GDP figure showing growth had shrank at two times the rate of analysts forecast proves that Europe is some way from a recovery and unable to absorb any geopolitical concerns. Given this the Euro is struggling and heading towards a one-year low of $1.30.

Simple supply and demand controls the headlines with US crude at the moment. There is no reason for the price of WTI to be as high as they are given the amount of supply and the lack of demand. Because of this WTI for September has dropped $2 to $95.56, which is the lowest level since January.

Gold price is definitely feeling the pressure at the moment given all the toing and throwing from U.S economic indicators as well as geopolitical ups and downs. However it has help up quite well. China demand has fallen and India has regained its position as the world’s leading gold buyer, but Gold is still up 9% for the year. Currently trading at $1313.