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Reports UK

UK stock market commentary (May 08, 2014): All eyes on Draghi

May 8, 2014, Thursday, 05:27 GMT | 00:27 EST | 08:57 IST | 11:27 SGT
Contributed by Capital Spreads

European equities will open fairly flat this morning in what is becoming a common theme of late. May has provided traders with very little volatility despite a host of company earnings, economic data and geopolitical tensions – the FTSE has a 70 point range this month. Investors are very comfortable where they are and will presumably be plotting their next attack on new highs. Imagine where the markets might be without the crisis in Ukraine?

However, the BOE and ECB are both coming to the party today. Mark Carney and his band of merry men are not expected to do anything so the interest lies with Signor Draghi. Given the improvement in the performance of the Eurozone recently, rates are expected to stay stuck in the mud, but the following press conference usually gets the market examining his poker face.  He has surprised us before, don’t assume an eventless session.

Dow

The Fed Chair Janet Yellen reiterated her monetary accommodating views yesterday saying the US must spur growth given lingering issues such as inflation and employment. In reaction, stocks moved higher with the Dow Jones gaining 94 points to 16,522, discarding another bad run for Internet shares led by Groupon and Yahoo.

Euro

The shared currency stayed firmly on course to reach the psychologically important $1.40 mark putting further pressure on ECB to act at its interest rate meeting later today. A strong currency does not bode well if you want to fight a slumping inflation. However, euro lost 19 pips to 1.3910 overall yesterday as investors did not feel quite ready to test the aforementioned level.

WTI

Surprisingly, the US crude oil inventories dropped by 1.8 million barrel last week versus expectations for 0.9 million barrels build as indicated by the US Department of Energy. That pushed the WTI crude prices $1.00 higher to $100.84 which in turn reduced the discount to Brent oil.

Gold

Gold investors took the positives from Yellen’s speech yesterday i.e. ‘sufficient underlying strength’ fearing continued tapering. As a result, they pushed gold prices $18.3 down to $1289.8 as the demand for safe haven assets could plunge.