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Reports UK

UK stock market commentary (June 03, 2014): Traders taking the first half of the week easy

June 3, 2014, Tuesday, 06:24 GMT | 01:24 EST | 09:54 IST | 12:24 SGT
Contributed by Capital Spreads

European equities are set to drift lower as risk appetite wanes. With the major indices perched near key levels and market moving releases expected from central banks and the BLS later this week, traders are content to sit on the sidelines until then. Although there are a few minor titbits of data out before then, it’s unlikely that traders will give them much credence. Even yesterdays farcical multiple revision of the ISM Manufacturing failed to have any lasting effect on markets.

The Dow Jones reversed an earlier slump, ending 30 points higher at 16,740 and reached a fresh all time high of 16,743 in the process. It happened as the Institute for Supply Management twice corrected the reading for May, finally at 55.4. It appears the equity market managed to shrug off last week’s report showing a contraction in the US economy for the first time in 3 years.

On one hand there’s wide consensus the ECB is ready to expand easing on June 5 meeting as euro area inflation is expected to have dropped to 0.6% in May from 0.7% in April. On the other hand the US forecasts an improvement for its labour market. So, little surprise to see the EUR/USD pair continuing its fall, 39 pips to 1.3596 in yesterday’s session.

Crude oil prices started the week on the offence only to reverse course later on, heading south and closing the day 44 cents down at $102.46 a barrel. In the background there were reports that an oil exports terminal in Libya is about to be reopened. On top of that China’s manufacturing came in lower than anticipated which might keep oil demand under pressure.

As equities rallied, the demand for gold deteriorated further pushing its price even lower to $1243.3. a $7.0 loss for the day. The choice of alternative investments is not very popular at the moment with stock markets reaching record highs. In addition, inflation seems also forgotten which does not help either.