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Reports UK

UK stock market commentary (July 15, 2014): Bulls crossing their hooves for positive catalysts

July 15, 2014, Tuesday, 06:24 GMT | 01:24 EST | 09:54 IST | 12:24 SGT
Contributed by Capital Spreads

European equities are set to open flat as traders await data. The bargain hunters were out in force yesterday and anything that was at a knock down price after recent falls has been snapped up. However, traders are taking a little breather before UK CPI and the German ZEW Surveys to see how sentiment pans out. UK inflation has been slipping and another weak reading should assuage the concerns of an imminent rate hike. Likewise, the steady flow of weakening data from Germany is set to continue and you could be forgiven if you thought that this would be bearish considering that they are the only country keeping Europe afloat. However, if this spurs the ECB to resort to even more extraordinary measure, the markets will probably work its ‘bad news is good news’ magic and take it as bullish.

Today we also see Mark Carney testifying before the House of Commons Treasury Committee and Janet Yellen testifying before the Senate Banking Committee. Whilst both of them are not immune to making market moving school boy/girl errors, we see the odds in favour of them making a dovish clanger.

The Dow Jones rebounded after last week’s decline, gaining 84 pips to 17,052 as Goldman Sachs predicted the equity rally will continue. For now it appears that concerns over financial stress in Europe failed to spread into the US markets so investors remained optimistic about the current corporate earnings season.

European Central Bank President Mario Draghi warned that banks shouldn’t use cheap money from the central bank to buy government bonds. In addition he said that risk to the outlook is on the downside. Nonetheless, despite that and the fact industrial production in the euro area was weaker than expected, the shared currency moved up 17 pips against the dollar to 1.3619.

Bargain hunters spotted the opportunity and jumped in during early trading yesterday pushing the WTI crude prices 58 cents higher to $101.04 a barrel. However, the market prices are near a two month low and considering the US oil supplies are plentiful, further weakness for crude oil prices is a distinct possibility.

Amid renewed rally for equities and easing fears over Portugal’s banking system, investors saw no reason to pay that safety premium for gold. As a consequence, they pushed the precious metal sharply down with its price ending $31.5 lower to $1307.2.