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Reports UK

UK stock market commentary (June 13, 2014): Will Friday the 13th spook markets?

June 13, 2014, Friday, 05:59 GMT | 00:59 EST | 09:29 IST | 11:59 SGT
Contributed by Capital Spreads

European equities endured a choppy but ultimately flat session yesterday but are set to be dragged lower this morning by overnight weakness in the States and Asia. What started out as a trickle of selling on profit taking has traders nervous that it could swell up in to a gush and lead to a more pronounced decline. The acceleration in negative sentiment has been put down to the uncertainty in Iraq and weaker US economic data however, for those slightly more esoteric members of the trading community, there is a more other worldly explanation.

For those superstitious traders, we have a host of negative things weighing on the markets today in the form of Friday the 13th, a full moon and a possible coronal mass ejection otherwise known as a solar flare. Supposedly Friday the 13th has been part of market superstition since 1907 when a book of the same name was published about a stock broker who tried to crash the market, although historic data shows that there’s no increased probability of declines compared to any other day. However, studies by RBS and the Harvard Business Review have shown that markets tend to underperform around full moons and unbelievably, the Federal Reserve Bank of Atlanta produced a study showing that solar flares have a negative impact on markets. If markets do get slammed today and the usual talking heads are at a loss for what happened, now you’ll know the truth.

A weaker than expected rise in the US retail sales (0.3% versus 0.6% forecast) coupled with a bigger than estimated climb in the weekly jobless benefits kept the equity under pressure yesterday. The Dow Jones lost 107 points to 16,752 with the short term trend now turning bearish. The sell off seen in the last two days may have reminded investors that whilst the data remains positive, a few bumps cannot be discarded.

Bargain hunting after four straight declines has allowed the shared currency 22 pips rebound against the dollar to 1.3552. It was undoubtedly helped by the US economic data missing estimates raising questions whether this slowdown might convince the Federal Reserve to keep interest rates at record low levels for longer.

An escalation in violence in Iraq where militants captured the city of Mosul and are moving toward Baghdad has put the energy complex on high alert. The crude oil disruptions for one of OPEC’s top producer could easily spread around Middle East. Consequently, the WTI crude prices rallied sharply yesterday to gain $2.39 to $106.87. The US President Barack Obama said he’s considering ALL possibilities.

Demand for safe haven assets made a comeback after events in Iraq which in turn pushed gold prices $12.3 higher to $1273.2. It happened as the stocks stumbled for the second day. Albeit a change in the near term it’s too early to say whether the precious metal has started to see better days.