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Reports UK

UK stock market commentary (July 18, 2014): Bearish start but for how long?

July 18, 2014, Friday, 05:50 GMT | 00:50 EST | 09:20 IST | 11:50 SGT
Contributed by Capital Spreads

European equities are set to open lower on the possible negative ramifications of the downed Malaysian passenger flight and the Israeli ground invasion of Gaza. Yesterday didn’t start off as a particularly bearish day but some traders sixth sense must have been particularly attune as sentiment had already started to dip before the open. The natural reaction was to leave risky equities and move into safe haven assets. However, despite the uncertainty that traders will be waking up to this morning, overnight we’ve actually seen an outflow from safe heavens such as the yen, gold and bonds. Also, Asian markets are off their lows and US index futures seem to be parring some of their losses so the initial sell-off could be short lived.

Escalating tensioned in Ukraine where a Malaysian Airliner was shot down near Russian border triggered a sharp selloff in equities markets. Towards the close the losses were accentuated by the news that Israeli ground forces were sent into Gaza Strip as they try to put an end to the missiles fired by Hamas. So, we had a risk off day which pushed the Dow Jones 143 points down to 16,962.

By and large it was a rather quiet day for the shared currency which remained flat against the greenback at 1.3525. Currency investors took a breather to assess the fresh bout of sanctions against Russia and the crash of a Malaysian plane with 298 passengers by allegedly pro Russian rebels in eastern Ukraine.

A boost in the US oil refinery process led to a decline in stockpiles and in turn continued to offer support to the WTI crude prices. But undoubtedly, yesterday’s steep rally in oil prices of $1.93 to $102.75 was exacerbated by the heightened geopolitical tensions in the Middle East and Ukraine amid new sanctions imposed on Moscow.

Gold prices posted a sharp rise of $20.4 to $1318.9 yesterday on the back of renewed turmoil in Ukraine and Gaza Strip. The climb was sparked earlier in the day when the US and the European Union imposed fresh sanctions on Russian business.