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Reports UK

UK stock market commentary (July 17, 2014)

July 17, 2014, Thursday, 05:10 GMT | 00:10 EST | 08:40 IST | 11:10 SGT
Contributed by Capital Spreads

European equities are set to open lower tracking cautious cues from Asia. Despite US markets closing with modest gains yesterday, the positive sentiment doesn’t seem to be catching. There’s nothing particularly bearish out to trigger this reversal in sentiment, so it’s quite worrying that the bulls have already run out of steam when they’ve only recovered a fraction of last week’s losses. This week has seen some positive economic data, good corporate earnings and the major central bankers generally sticking to their accommodative approach, so if the bulls can’t rally on that then you do have to wonder about the overall health of the market.

The much awaited Beige Book report in the US indicated strong consumer spending together with expanding manufacturing. At the same time Federal Reserve Chair Janet Yellen said that asset valuations ‘are not out of line with historical norms’. The news encouraged investors to stay confident so they pushed the Dow Jones to a record close of 17.116, 43 points up for the day.

The US economic data keeps improving fuelling speculations the Fed might raise interest rates sooner than market expectations. It was the case again yesterday which in turn sparked renewed interest for the greenback. So the EUR/USD pair lost 43 pips to 1.3525 and is back to the recent low levels seen on mid June.

A bigger than estimated draw in US crude oil inventories as indicated by the US Department of Energy (down 7.5 million barrels vs forecast for a drop of 2.1 million barrels) has allowed WTI crude prices to rebound yesterday. In addition, China’ economic growth exceeded expectations accentuating the rally in crude which finished $1.31 higher at $101.52.

It was more of a dead cat bounce for gold prices after two days of significant losses. Strong US economic outlook restricted the recovery to just $5.6 to $1299.4 with equities and crude attracting most of investors’ interest.