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Reports UK

UK stock market commentary (July 09, 2014): Minor correction or massive collapse?

July 9, 2014, Wednesday, 04:53 GMT | 23:53 EST | 08:23 IST | 10:53 SGT
Contributed by Capital Spreads

European equities are set to open mixed as fears of a full on corrective rout remain strong. Despite Aloca kicking off earnings season to a good start and the expectations of a dovish FOMC statement this evening, the bulls still seem to be in disarray after the kicking they’ve taken over the last two days. In an unusual reversal of the way markets interpret news; negative stories are getting all the attention whilst bullish stories are being shrugged off.

Slight concerns that US equities have gone up too fast lately relative to the pace of world’s economic growth, continued to push the Dow Jones south yesterday. It dropped 92 points to 16,931 also on growing speculation that a severe correction might be on the cards. However, the earnings season kicked off with Alcoa rising over 1% in late trading on better than expected results.

Ahead of the release of FOMC meeting minutes, European Central Bank President Mario Draghi reaffirmed his stance to ease the monetary policy to spur growth and contain the danger of deflation. Nonetheless, the euro moved a tad higher versus the US dollar, 6 pips to 1.3611 as the German trade balance surpassed estimates.

It felt like a dead cat’s bounce yesterday as the WTI crude prices recovered just 7 cents to $103.47 after briefly crossing above the $104.00 mark in intraday trading. It is possible that energy investors were reluctant to take a position ahead of the FOMC minutes and the release of the weekly oil inventories.

We saw another rather quiet day in gold trading as investor are still trying to estimate the timing of an increase in interest rates. The yellow metal closed unchanged at $1319.7 as a selloff in equities failed to attract any interest in precious metals.