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Reports UK

UK stock market commentary (May 22, 2014): Fed gives the green light to the bulls

May 22, 2014, Thursday, 07:22 GMT | 02:22 EST | 10:52 IST | 13:22 SGT
Contributed by Capital Spreads

European equities are set to start with a bang on positive overnight cues. US markets closed with solid gains following the release of a set of dovish FOMC meeting minutes. Although some “prudent planning” had been undertaken on how to raise rates, it appears that the time line for such an event is still some long way off in a hypothetical goldiocks economy. With the bulls getting a green light, expect them to take this opportunity to challenge those stubborn technical resistances.

Yesterday the Dow Jones more than made up for the down day on Tuesday in what represented an almost exact mirror image. All the losses were reversed, and this time on the back of ‘good’ retail sector earnings, as opposed to Tuesday’s bad retail reports. Tiffany & co led the charge supported from some good news from Netflix regarding its future plans in Europe. The Dow gained 158 points to close at 16,533 - this was the biggest gain seen in five weeks.

Having trended down for most of the day, the shared currency made a late comeback following the minutes. The Fed re-iterated their stance to maintain low interest rates for the foreseeable future, weakening the greenback. The Euro closed down 13 pips at 1.3687 against the dollar.

When is this run going to end? West Texas Intermediate rose to a one month high yesterday as a report showed that supplies tumbled as imports fell to a 17 year low. A Chinese manufacturing gauge also came up trumps to further support the price. The contract for July delivery settled up $1.74 cents at $104.07, a daily gain of almost 2%.

Gold fell slightly yesterday as a stronger dollar and a positive reaction from equities to the Fed minutes continued to weigh on market upside. However, a relaxation of Indian import rules is expected to come into play in the future which prevented more severe falls. Futures for June delivery closed down $6 at $1,288.