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Reports UK

UK stock market commentary (May 29, 2014): Stairway to Heaven

May 29, 2014, Thursday, 04:40 GMT | 00:40 EST | 09:10 IST | 11:40 SGT
Contributed by Capital Spreads

European equities look set to open fairly flat again as the ‘risk on’ button shows little sign of being switched off. When a lurch to the upside loses momentum, it is fairly normal to see a retracement of sorts as profits are booked and bears catch a whiff of the honey. In this instance however, the sell-off is showing little sign of materialising. Investors have reached the summit of the mountain and who can blame them for taking a session or two to admire the view. However, once the sun goes down they will be looking to find the door that leads them to the stairway to heaven.

Data is thin on the ground in Europe today but we may get some excitement in this afternoon’s session. Initial Jobless claims and various secondary GDP readings from across the pond await traders who have been fairly starved of fun recently. Let’s hope for some volatility.

Retailers in the US led the decline in equities yesterday with the Dow Jones losing 29 points to 16,649. Testing the record high is now a distinct possibility but it seems investors felt the need for a breather first, taking some profits off table. Later today, the Commerce Department may indicate the US economy contracted 0.5% in the first quarter.

The euro resumed its downfall against the greenback breaching 1.36 mark to reach a new recent low of 1.3590, a 45 pips drop for the day. The culprits were an unexpected increase in German unemployment coupled with a fall in euro area’s lending. As a result investors increased bets the ECB is getting closer to use stimulus measures.

A stronger US dollar combined with a slightly lower stock market drove the WTI crude prices $1.05 down yesterday to $103.08 a barrel. In the background there’s the overall picture of a market awash with oil supplies and the forecast of a drop in GDP does not bode well for the WTI prices. Its short term trend has shifted south.

No bounce for the precious metal after the nosedive seen on Tuesday following reports in the media that exchange traded assets backed by bullion are at the weakest level since 2009. So gold prices lost another $5.4 to close at $1258.7.