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Reports UK

UK stock market commentary (June 25, 2014): Volatility (a small amount) returns!!

June 25, 2014, Wednesday, 06:22 GMT | 01:22 EST | 09:52 IST | 12:22 SGT
Contributed by Capital Spreads

European equities look set to start on the back foot following overnight declines in the US and Asia. There is no clear consensus on what has caused the turn in sentiment with some putting it down to the Ukraine and Iraq situations finally catching with the markets; whilst others are suggesting that it’s just a mere bout of profit taking. Whatever the reason, the bears look to be firmly in control and leaning heavily on that sell button as we expect to see a fairly large gap lower, given current volatility, on the open for the major European indices.

As the equity markets were hovering near all time record highs, investors became a little nervous and sold at the first sign of trouble. Reports of escalating violence in the Middle East where Syrian warplanes struck targets in western Iraq, discarded the positive US economic data sending the Dow Jones 81 points lower to 16,828.

For the second day in a row the shared currency closed near flat versus the greenback at 1.3605 despite the German IFO Business Climate coming in weaker than expected. Sluggish manufacturing and services in the euro zone coupled with slumping inflation and consumer demand is undoubtedly keeping the ECB nervous these days.

In the face of heavy fighting in Iraq, there is little evidence to suggest that oil production on the ground was seriously disrupted. On top of that Saudi Arabia announced that if needed they can increase the output to make up the potential shortage. So, the WTI stopped for a breather, finishing just 9 cents down at $105.94 a barrel as investors were reassessing the situation in the Middle East.

A slowdown for business confidence in Germany and home prices in the US rising less than initially anticipated, kept demand for gold well supported. The precious metal climbed $1.1 to $1318.9 yesterday although this early morning a sell off is underway.