US stocks lose early gains

UK and European markets were firmly in the red again this afternoon, while US stocks failed to hold on to early gains, signifying the buyers are still keeping out of things.

Wall Street
Source: Bloomberg

Rio sees 15% divident boost

From airports to salmon fisheries, sanctions will have a wide impact, and when the damage to the ailing eurozone economy is considered the worried reaction of European markets becomes more understandable.

As one of Russia’s major trading partners, Germany can ill-afford the loss of export markets, so maybe the Ukraine crisis will be the element that finally sees Germany end its long-term opposition to ECB QE. That would be something to really power markets, but Mario Draghi doesn’t seem to be on that page just yet.

Rio Tinto has seen its gains from this morning ebb away, removing one support for the index but in the longer term the shares should command more and more interest, especially with a 15% boost to the dividend.

Fall in jobless claim has little impact

Early gains for US markets are slipping away, despite a fall in jobless claims that took them below the 300K mark once again. Good news is not treated as bad yet, but it certainly isn’t giving the market a reason to rally.

There is still plenty of August left for volatility to kick markets around some more, and given that fact investors can’t really be forgiven for opting to take the summer off and look again at their portfolios in September. By then, they hope, the Ukraine crisis will have ceased to dominate headlines, and the future can be contemplated with a calmer outlook.  

Interest rates focus overshadows commodities

The focus on interest rate decisions removed some of the excitement from commodity markets, although the constant discussion of sanctions and their potential impact will provide a rational for further strength in gold. If the sanctions begin to have a real effect then this could provide the uplift that gold has been lacking in recent weeks, with the potential for a rally back to $1350 if tensions on the Ukraine border rise once again.

Spot oil prices are not reflecting this worry yet, but the activity in futures markets suggests that those with their eye on the long game are more worried about the supply outlook further down the line.

FX markets unmoved by Draghi speech

The central banks provided little excitement, but then none had really been expected. Leaving aside a discussion of Mr Draghi’s holiday plans, the overall takeaway is of a central bank keen to talk about the fragility of the eurozone economy, but not in any great hurry to do anything about it. The BoE decision was merely a formality, the really important element comes later in the month when voting patterns are revealed.

The pound remains oversold versus the dollar, so the potential for a bounce exists but ahead of the inflation report next week most traders will likely prefer to wait and see.

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