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UK stock market commentary (September 02, 2014): Bulls and bears can’t make head nor tails of this

September 2, 2014, Tuesday, 06:12 GMT | 01:12 EST | 09:42 IST | 12:12 SGT
Contributed by Capital Spreads

European equities are set to open flat as markets remain jittery. With no cues from the US due to the Labour Day holiday, European traders have been left to weigh up geopolitical tinder boxes on the one hand against ECB gift boxes on the other. With Putin running rampant across Ukraine and Kiev threatening that a ‘great war’ is coming, markets should be tumbling. However, the perversity of bad news is good if it leads to quantitative easing from the ECB got another boost yesterday following yet more weak economic data in the form of Manufacturing PMIs.

When markets are in this awkward period of stasis you just know that something big is about to shove markets one way or the other. So if you see Putin going shirtless or Mario Draghi bulk buying paper that could be a good hint to get positioned the right way round.

Amid a quiet trading session with volumes over 30% lower than last month’s average, FTSE 100 rose just 7 points to 6824. The price action was dominated by a rise for BAE Systems and ITV which is rumoured to be the subject of a takeover. In addition, Tesco was under pressure after being under the spotlight lately for ‘the lack of strategy’.

The euro continued its plunge against the greenback yesterday following ongoing signs the common area is struggling to keep up with its counterpart across the Atlantic. Manufacturing data in Europe was weaker than estimated and fuelled speculation that Mario Draghi might have to take action at the ECB meeting later this week.

After a sharp rise on Friday, the WTI crude prices stopped for a breather closing rather flat around $95.84 a barrel. With the US equity markets closed for Labor Day holiday, direction was offered only by the greenback but investors were reluctant to commit too much ahead of an eventful rest of the week with interest rates meeting in Europe and the release of nonfarm payrolls data in the US.

It was not much action for precious metals either as gold prices finished marginally down at $1287 after trading in a tight range. Markets seem to think that for now the health of the world’s economy outshadows any potential risk coming from either Ukraine or the Middle East.