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Reports UK

UK stock market commentary (July 01, 2014): It was better last year

July 1, 2014, Tuesday, 09:30 GMT | 04:30 EST | 13:00 IST | 15:30 SGT
Contributed by Capital Spreads

European equities are set to open flat to marginally higher as traders remain cautious. With the second quarter over, time is running out for traders to replicate the stellar double digit performances of 2012 and 2013 with the FTSE languishing around flat and the DAX and CAC up a mere 3%. Markets seem to have gotten over their naive optimism for loose monetary policy that propelled markets higher in prior years and have matured into cynics taking said policy as a sign of economic weakness. As yesterdays European lending and inflation data showed, it won’t do much good throwing more petrol on the bonfire if the flame has already gone out. There’s a huge amount of data to digest over the next few days so traders are likely to be sat on the sidelines, adjusting their positions on the fly, but if there’s no clear consensus building that heady times are on their way back, we could see markets struggle to hang onto their feeble gains for 2014.

On one hand the manufacturing data was weaker than expected with Chicago PMI falling to 62.6 vs forecast of 63.2. On the other hand we saw a much stronger rise for US pending home sales, 6.1% against predictions for 1.4%. So amid the mixed data, the Dow Jones closed marginally higher (4 points) to 16,841.

Largely in line with expectations, consumer prices in the euro zone grew at 0.5% last month which in turn kept the ECB under pressure to ease its monetary policy even further. The shared currency continued its rally against the greenback gaining 47 pips to 1.3692.

Despite renewed weakness in the US dollar which should normally support the commodities spectrum, WTI crude prices posted a drop of 17 cents to $105.52 a barrel. The energy complex was encouraged by reports that Iraq will increase crude output next month indicating that oil production facilities are not affected by violence.

A drop in business activity sent investors into the safety of precious metals in the face of record high prices for equities. As such gold prices climbed $11.1 to $1327.7 with heightened geopolitical tension around the world also supporting the advance.