New York: 21:20 || London: 02:20 || Mumbai: 05:50 || Singapore: 08:20

Reports UK

UK stock market commentary (June 05, 2014): First Thursday of the month means a half-day for traders

June 5, 2014, Thursday, 06:01 GMT | 01:01 EST | 09:31 IST | 12:01 SGT
Contributed by Capital Spreads

European equities are expected to open flat as traders hunker down ahead of the central bank meetings. Expectations are for the ECB to let slip the dogs of dovish monetary policy today with, at a minimum, a cut in the main interest rate. With the robust German economy probably the only thing keeping the euro zones paltry growth rate and inflation rate the right side of 0, demands for action from the ECB are turning into bleating pleas. However, with so much already priced in and Draghi’s history of talking the talk but not walking the walk on firing off bazookas, another impotent outing could see risks to the downside.

No change is expected from the BoE today and rates are set to remain at record lows once more. However, generally robust economic data of late, not least yesterdays solid Services PMI continues to argue for a hike sooner than later. With the Nationwide house price inflation data on Tuesday showing that the hosing market continues to storm ahead and the Halifax data surely set to show the same thing this morning, those estate agents planning to pick up that Porsche boxter on 100% finance should maybe give it a second thought.

A private report on payrolls in the US disappointed the market yesterday, sending equities lower in the early afternoon session. However, the Beige Book survey revealing the economy expanded at a ‘moderate to modest pace’ was well received by investors already cheered by a bigger than expected pick up in the service industries. In truth market participants already positioned themselves ahead of the employment report on Friday just finding excuses not to push the prices too much one way or the other. The Dow Jones ended 10 points up at 16,735.

It appears that some sort of a rate cut is already priced in but the ECB might be in the mood to announce a little extra at its meeting later today. So the shared currency stayed under pressure against the greenback dropping 30 pips to 1.3598. The real question on everyone’s mind is how much is Draghi&Co prepared to intervene, not if.

Despite a bigger than estimated drop in weekly crude inventories as indicated by the US Department of Energy, the overall supplies remained near record high levels. It was seen as a sign of declining oil demand which in turn pushed the WTI crude prices 39 cents lower to $102.40 a barrel.

Sending the stock market to new all time highs seems to capture the entire investors’ focus at the moment so gold is completely ignored. It was the case again yesterday as the precious metal tried unsuccessfully to move above the psychologically important $1250.00 mark only to finish $1.2 down at $1243.6.