UK & US Economic Update – 24 October 2014

Developed markets close first week of gains since pre-Scottish referendum

Developed market equities closed out their first week of gains since the Scottish referendum on Friday as better than expected economic data from both China and Germany prompted many investors and traders to breath a sigh of relief after weeks of growing concerns over the global growth outlook.

Despite the fleeting period of respite, the coming week sees numerous risk events threatening to unhinge the new found sense of calm. While markets may be closed, the investor and trader’s week will begin on Sunday this time around as the Ukrainian people go to the polls and the ECB begins to release the results of the long awaited European Banking Stress Tests and Asset Quality Reviews.

While investors in financial shares may bear the brunt of any equity market volatility to begin with, we see equal risk in the Ukrainian parliamentary elections as well. This is most notably because of recent unrest in  Kiev, combined with reports of frustration among the local population who believe that little has changed in terms of how the government is run.

Although the above referenced discontent relates more to the country’s inability to tackle rampant corruption & cronyism within the halls of government, and thus has little direct link to the rebellion, it is important to remember that the crisis began with a popular uprising in response to the very same forms of corruption under former president Viktor Yanukovych.

In addition to the potential for increased tensions in Ukraine, according to Reuters, the world will also hear of the European Commission’s verdict on the French draft budget for 2015 on Monday morning.

This is an important event as, after results emerged just days ago detailing how many of the bloc’s most troubled nations have fought hard to meet their budget pledges and have come close to doing so as a result, expectations are that the commission will come down hard on France’s inability to make progress.

At the same time as the French government awaiting its verdict, Monday morning is also likely to see more rhetoric from some other European politicians, including David Cameron in the UK, in response to the European Commission’s demand for additional funding at the close of the current week.

The demands came when, during a bloc wide climate conference, the commission presented several member states with a bill for increased membership fees, which it deems are owed as a result of new statistical methods that are being employed to calculate gross national income (GNI).

Consequently, markets could once again awaken to a deeper tone of euroscepticism on Monday morning in addition to renewed geopolitical and conflict risk emanating from the potential for further unrest in Ukraine.  

FTSE 100 // 10 Minute Intervals
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Dow Jones // 10 Minute Intervals

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