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Reports UK

UK stock market commentary (May 15, 2014): Have we topped?

May 15, 2014, Thursday, 05:41 GMT | 00:41 EST | 09:11 IST | 11:41 SGT
Contributed by Capital Spreads

European indices are set to ease back on the open as traders worry that yesterday’s practically flat finishes have marked the apex of the up move. Negative sessions in the US and Asia overnight have also reinforced concern that the some traders have decided that the top is in.

Despite central banks still clearly in the bulls corner, what with Janet Yellen coming out with dovish comment last week, Mark Carney pushing back expectations for an interest rate hike yesterday and the ECB all but stating that they will do something stimulative at their June meeting, it’s very telling that the markets aren’t in runaway territory and one has to wonder what more the bulls are waiting for?

The sell off in the Dow yesterday will not go down as one of the world’s great quandaries. You might argue that the changing economic scenario over the last week has not warranted a 200 point rally. This, coupled with a situation in the Ukraine that is slipping toward civil war, and many investors saw a great opportunity to book some profits. There is certainly some downside risk from here. The Dow Jones dropped 101 points to finish at 16,614.

Following the sell off the day before, the Euro had a day of reflection and ended up just about where it started off. The Eurodollar market was quite jumpy though changing direction many times, but it never strayed too far. Traders will look forward to the US Initial Jobless claims this afternoon, which may be more eagerly anticipated than normal. The shared currency rose 10 pips to 1.3715.

Oil prices moved higher in trading yesterday, as a decline of inventory at the Cushing storage location drove the market. Despite a 900,000 barrel increase in the overall oil stockpiles, the draw downs at Cushing was perceived to be more important to traders. US crude gained $1.11 to settle at 101.70.

Gold had a positive day yesterday as it benefitted from the decline of equities. The inverse relationship was clear to see yesterday as money was moved from risk assets to less perilous habitats. The precious metal is now at a one week high and investors will be looking to see how the situation in the Ukraine develops. Spot gold closed up $9 at $1,305.

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