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UK stock market commentary (September 01, 2014): Who’s more influential: Putin or Draghi?

September 1, 2014, Monday, 05:17 GMT | 00:17 EST | 08:47 IST | 12:17 SGT
Contributed by Capital Spreads

European equities are set to open mixed on conflicting cues. The run of weak economic data from the continent continued with another dip in inflation, rising unemployment in Italy and a collapse in German Retails Sales on Friday, adding further pressure on Mario Draghi to actually do something. Despite the August rally petering out over the last few sessions, the bulls are still hanging onto hopes that this weeks ECB meeting will, at the least, give some indication that some stimulative relief is in the offing soon.

However, on the flip side is the continual engulfing of Ukraine by the Russian ‘backed’ forces. With Putin growing increasingly confident that he can act with impunity, the opening of a new front in the conflict near Mariupol should have sent traders reeling. Instead, traders are slightly relieved that the only thing the West can cobble together is another set of flaccid sanctions which Putin will surely shrug off.

Ahead of Labor Day holiday, equity trading was rather thin with volumes well below average. The US economic data remained strong with consumer sentiment surpassing expectations but cautious investors did not want to stay long ahead of a long weekend. So, the Dow Jones pulled back in the afternoon session, closing 20 points lower at 17,088.

The shared currency reached the lowest level against the greenback 1.3133 last seen on 6th of September 2013. On one hand there’s the heightened demand for the dollar following the conflict in Ukraine and ongoing economic recovery in the US. On the other hand, on this side of the pond there’s growing speculation the ECB is to expand monetary stimulus. So, the EUR/USD pair dropped 43 pips ending the week at 1.3139.

Strong economic data in the US continue to fuel bullish sentiment and in turn support the case for a higher oil demand. On top of that, tensions in Ukraine seem to escalate which also drives up crude prices. In reaction the WTI prices posted a sharp rally on Friday, gaining $1.30 to finish at $95.87 a barrel.

After a short recovery, gold prices resumed their slump losing $2.1 to $1287 as investors were cheered by yet another set of good results for the US economy. Technically, we’re still trading around the levels seen at the beginning of April as for now the sideways, consolidation pattern dominates the overall picture.