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UK stock market commentary (August 22, 2014): Hawks lurking in the wings?

August 22, 2014, Friday, 05:01 GMT | 00:01 EST | 08:31 IST | 11:01 SGT
Contributed by Capital Spreads

European equities are set to open flat as traders turn cautious. With little in the way of economic data out today attention turns towards the Jackson Hole Symposium where traders will look for further clarity on global interest rates. With speakers from the Fed, BoE, ECB and the BoJ it will be a smorgasbord of global monetary policy for traders to feast on. The consensus for today is that comments will lean to the dovish side, but traders may not want to take the risk of a rogue tongue slip going into the weekend. Also, there could be a few rogue hawks lying in ambush waiting to grab the mike following the most recent FOMC and BoE minutes.

US stocks continued to rise on Thursday with hawking Fed Minutes failing to spook the bulls. The S&P 500 reached record highs with the Dow Jones Industrial Average climbing 60 points to 17,039. Its been a great week for equity traders with the Dow up 2.3 percent, with the key question still remaining, how long can these markets continue to rally with an inevitable rise in interest rates on the horizon? However for now the bulls seemed for focused on the short term, taking solace in better than expected US jobless claims which helped push the markets even higher.

The dollar retreated from its 11 month high versus the euro on Thursday with the currency pair climbing to 1.3280. Yesterday the Federal Reserve minutes revealed that officials are considering a rate hike sooner rather than later, this initially strengthened the dollar but today the market saw profit taking in effect which sent the greenback lower. Todays data also showed that manufacturing PMI for the euro zone was lower than expected which raised some concerns over the state of the European economy.

West Texas Intermediate Oil is on track for its fifth weekly drop which would be the commodities longest slump in almost 9 months. WTI initially fell on Thursday after weakening manufacturing reports in china, however things picked up after positive economic data from the US which sent WTI rallying to close the day up. WTI reached $93.92 a barrel on the New York mercantile Exchange during the early hours in the U.S.

Spot gold is still close to two month lows with the markets falling further after yesterdays release of the FOMC minutes. Gold’s been having a rough week with the equity markets strengthening and the dollar close to 11 month highs. Spot gold reached a low of $1284.80 an oz on Thursday with investors worried that a potential rise in US interest rates in the near future will make the precious metal less attractive.