News Column

MARKET COMMENT: UK Stocks Set To Follow US, Asia Higher

August 10, 2014

Jon Darby

LONDON (Alliance News) - UK stocks are set to open higher Monday, following a late rally on Wall Street on Friday and a positive session in Asia, as geopolitical tensions appeared to ease.

Futures indicate that the FTSE 100 will open 38 points, or 0.5% higher at 6,605.00

Geopolitical concerns dragged UK stocks significantly lower last week, as the situation in eastern Ukraine remained on a knife-edge, the US began a bombing campaign in northern Iraq, and hostilities between Hamas and Israel resumed.

Following the European close on Friday, US stocks made a late turnaround amid reports that Russia was making efforts to de-escalate tensions with Ukraine and withdraw troops from the border. The DJIA and the S&P 500 both went on to close more than 1.0% higher.

The positivity has continued into the Asian session Monday, with the Nikkei closing up 2.4%, while the Hang Seng and the Shanghai Composite both continue up 1.3%.

Chinese inflation data released at the weekend showed consumer prices rose by 2.3% year-on-year in July, unchanged from last month. The index also matched economists forecast, but remained below government's annual target of 3.5%, which provides room for authorities to roll out more measures to support the economy in meeting the official 7.5% growth target.

It's a very quiet start to the week in the economic calendar, with just the Conference Board leading indicator scheduled from the UK at 0900 BST. The British Retail Consortium retail sales monitor is also due Monday, but not until after the market close.

US Federal Reserve Vice Chair Stanley Fischer may be of more interest to the markets Monday morning, when he speaks on the US economy from Stockholm0815 BST.

The economic calendar heats up as the week goes on, peaking domestically on Wednesday when the latest UK unemployment data will be released and the Bank of England publishes its quarterly inflation report, which will be delivered together with a speech from Governor Mark Carney.

Otherwise, geopolitics is likely to remain the overall driving force for markets early in the week, given the reaction already seen to headlines from Ukraine.

"Markets reaction to reports of a Russian pull-back was eminently predictable but it remains far too early to celebrate any de-escalation between Russia and Ukraine," said CMC Markets chief market analyst Michael Hewson.

Indeed the heightened tension levels were highlighted over the weekend when US Secretary of State John Kerry told Russian Foreign Minister Sergei Lavrov in a phone call: "Russia should not intervene in Ukraine under the pretext of peacekeeping." Ukraine said on Saturday that a Russian "humanitarian convoy" with peacekeeping soldiers had approached the border, which it turned back.

"Overall markets will start with a fairly quiet day in terms of data but will most definitely pick up as the week goes on. The real worry for markets will be the uncertainty over the horrendous stories gripping Iraq and Gaza," said Alpari chief market analyst James Hughes.

The price of gold has continued to soften from a spike towards the end of last week. Ahead of the European open, gold trades at USD1,306.38 per ounce.

The price of oil has remained relatively stable amid the US bombing in Iraq, currently trading at USD104.88 per barrel.

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Source: Alliance News

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