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Reports UK

UK stock market commentary (June 23, 2014): Tepid start

June 23, 2014, Monday, 05:57 GMT | 00:57 EST | 09:27 IST | 11:57 SGT
Contributed by Capital Spreads

Tepid gains are expected for the European bourses this morning following modest gains in the US on Friday and a pick up in Chinese economic data overnight. However, for all the bullish spin that is being placed on this rally, traders cannot ignore the situations in Iraq and the Ukraine, hence the apparent hesitation and scepticism with each move higher.

The Dow Jones reached a new record high on Friday and closed 33 points up at 16,935 following a rally led by M&A activity for drug makers. Earlier in the week the Federal Reserve Chair Janet Yellen expressed fairly confident views about economic growth also suggesting the monetary policy will stay accommodative.

Consumer confidence in the euro zone unexpectedly slumped in June, showing the region faces ongoing challenges and its recovery is still bumpy. So, despite the announcements after the Fed meeting which by and large hit the dollar, investors took a second look at the UER/USD pair and pushed it 10 pips lower to 1.3597.

The US President Barack Obama said he’s sending military advisers to Iraq and is prepared to take additional steps to assist the Iraqi army. As a consequence of those signs of escalation, there’s rising worry of oil supplies disruptions which continued to offer good support to energy complex and sent the WTI crude prices 53 cents higher to $106.63.

Amid the biggest weekly gains in 4 months for gold prices, investors played it safe ahead of weekend and took some profits off table. As such, the precious metal dropped $5.6 to $1314.5 but it appears the Fed managed to revive demand for gold (through its dovish statement) as a hedge against inflation and wealth preservation tool.