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Reports UK

UK stock market commentary (August 19, 2014): Ukraine? Meh

August 19, 2014, Tuesday, 05:30 GMT | 00:30 EST | 10:00 IST | 12:30 SGT
Contributed by Capital Spreads

European equities are set to start the session on a firm note as the bulls seem to have had enough of geopolitical jitters. The Ukraine has been a serious source of uncertainty over the last few months keeping bullish spirits tapered. At every single flare up markets had sold off thinking that NATO and Russia were about to go head to head. However, markets seem to have become hardened to the trading sentiment rollercoaster now after persistent false alarms and it’s doubtful that markets will react so negatively the next time Putin holds a military jaunt near the border again or the Ukrainians claim to have destroyed an invading force.

With geopolitics shrugged off it’s time to get back to trying to diving what is going on in the heads of central bankers. Carney has been characteristically flip flopping again lately, coming out all dovish in the quarterly inflation report then suggesting that rates could be hiked before real wages catch up. Traders are now none the wiser so expect them to take their cue from any slight bias in the minutes or if there’s a dissenter or two on the vote. With the FOMC minutes out after the close also, despite the bullish start, traders may keep the buying urge to splurge until tomorrow when they have been reassured by Yellen that US interest rates are going nowhere for the foreseeable future.

Equity markets seemed to have picked up where the left off with shares rallying after a shaky end to the week which saw stocks fall on the news of Russian trucks being destroyed by Ukraine. The bulls seem to have put the incident behind them and gathered strength from positive housing data and growing M&A activity in the US. Monday saw the Dow Jones Industrial Average surging 175 points and the Nasdaq climbing to new highs.

Despite Fridays gains in the EUR/USD Monday saw the currency pair fall below the 1.34 mark to close the day around 1.336. The fall wasn’t helped by Eurozone Trade data which gave the bulls little to be excited about. Tuesday could see little change in the Euro Dollar as traders await the release of the FOMC minutes on Friday, hoping to provide some clues as to when the US can expect a hike in interest rates.

West Texas Intermediate September fell over 1% to $96.24 a barrel on Monday which saw Iraqi Kurds regain some control in most of Mosul Dam. The end of last week saw the oils climbing with the situation in Ukraine putting some doubt in the heart of traders. However the slight easing in geopolitical tensions caused prices to slide and could see oils continue to fall even further in what’s already been rough month for the commodity.

After a slow week for Gold traders not much has changed with the precious metal still keeping in a tight range. Interest in gold is not what it used to be, long gone are the days where geopolitical risk would see strong rallies in the precious metals. Some investors are starting to lose faith in Gold’s safe-haven demand given its performance over the past year and a half. The situations hadn’t been helped by the recent rally in equity markets either.

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