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Reports UK

UK stock market commentary (June 10, 2014): Bulls out of breath

June 10, 2014, Tuesday, 05:43 GMT | 00:43 EST | 09:13 IST | 11:43 SGT
Contributed by Capital Spreads

European equities are set to open flat as the bulls take a breather. Although the bulls can’t muster a rapid start out of the blocks this morning, confidence still appears firm and there’s no notable negative cues on the horizon that could derail the rally. However, with many traders holding large paper gains, there’s always the possibility that some ones decision to book some profits could trigger a wider correction, but in this market you could also expect bargain hunters to make an appearance pretty rapidly.

Despite concerns for peak valuations in the US, there are signs the M&A activity is still strong pushing equities to new records. As such, the Dow Jones extended its recent rally reaching an intraday new all time high of 16,968 closing rather flat for the session at 16,940. It remains to be seen if that growing anticipation of a pullback will come to fruition on the very short term.

Investors’ confidence in the euro zone plunged more than estimates pushing the shared currency down amid reduced volumes due to Bank holiday in a number of countries including Germany and France. At the same time speculation grew that last week’s decision by the ECB could send investors out of the euro into higher yielding currencies/assets. The EUR/USD pair ended 49 pips down at 1.3593.

On one hand China’s exports rose more initially anticipated, on the other hand the US economic outlook keeps improving. It’s easy to see why investors are optimistic about the global growth and yesterday the energy market just showed that. The WTI crude prices posted a sharp rally of $1.78 to $104.55 a barrel helped also by reports that political tensions in Libya could disrupt oil supplies.

The good news about the US economy is met by the ongoing struggles in Europe where German investor’s optimism fell to 8.5 versus predictions for 13.3. So, gold has seen some safe harbour demand but just enough to put a stop to that violent sell off. Yesterday, the precious metal closed flat at $1252.00.