FTSE Set to Tumble as Scottish Referendum Fears Inspire Sharp Drop in Sterling

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Stock Market Trading

: 12 September 2014

European equities are set to open flat as they continue to stumble around in uncertainty.

With next week's risk events looming, traders are suffering from paralysis as it's impossible to predict how the Fed, BoE minutes and the Scottish referendum will turn out.

Are the Fed going to make a clear shift in their timetable for a rate hike?

Are the two hawks on the MPC set to become a trio?

Are the people of Scotland going to fall for Alex Salmond's promises and spark a wave of secessionist movement across Europe?

With all that to ruminate over, it's unlikely that spread traders will be looking to put on any large positions going into the weekend.

However, even the weekend won't give traders any respite from the mind games as we are expecting Chinese data on Saturday morning to continue the theme of a slow down.

Also, as the Scottish Referendum enters its final furlong, expect the Sunday papers to be chock full of conflicting polls and political pundits.

Yesterday, a rebound in oil prices managed to lead a recovery in share prices during the afternoon session, though the Dow Jones still ended rather flat around 17,060.

As mentioned above, investors are still cautious as they try to divine the timing of an interest rate hike from the Fed.

Perhaps today's retail sales can give them a little more confidence?

Stock Market Trading

: 11 September 2014

European equities are set to take their cue from positive sessions in the US and Asia by opening modestly higher.

Despite all the uncertainty swirling around, the bears aren't convinced that the time is right for a raid and so the bulls are clinging on for potential upside.

Markets can be forgiven for being listless right now; next week has huge risk events on the horizon in the form of MPC minutes, an FOMC meeting and the Scottish independence vote.

Given the hectic upcoming calendar, the uneasy truce between the bulls and the bears is likely to persist.

The Dow Jones managed to rebound yesterday, gaining 26 points to 17,065, after the markets rejoiced when Apple recovered Tuesday's surprise losses.

Investors are still weighing up the potential timing of a rate hike so jobless claims, retail sales and consumer confidence data will be closely scrutinised as usual.

Stock Market Trading

: 10 September 2014

Stock markets in Europe are set to open lower this morning as a combination of negative cues, stubborn technical resistance and profit taking conspires to hurt sentiment.

When in doubt, traders get out.

Although there isn't anything explicitly bearish for traders to sell off on, there's just too much uncertainty to justify the up trend.

Will the Ukraine ceasefire last?

Will Scotland break away from the UK?

Will the Fed and BoE start hiking rates?

In this situation, it seems highly rational to take some money off the table while we wait to see how these events play out.

Hopes that a disappointing US employment report might delay the Fed from raising interest rates have dissipated quite quickly.

Instead, investors are concerned that we might actually see a rate hike sooner than expected.

This meant that we lost the feel good factor sparked by Apple's new product launches, with a sell off in equities seeing the Dow close 69 points lower at 17,039.

Stock Market Trading

: 09 September 2014

Since the beginning of August, US equities have rallied to fresh record highs for 5 consecutive weeks.

Investors decided to adopt a more cautious approach yesterday after Friday's NFP report toned down the optimism regarding the health of the economy.

As such they took profits off table, sending the Dow Jones 12 points lower to 17,109.

Whilst Asian markets managed to shrug off the weakness overnight, European equities are set to edge lower on the open.

Traders in Europe are becoming a little more hesitant following the huge run up we've seen in recent weeks.

Sentiment isn't overly bullish and is certainly not conducive to pushing the indices through their recent highs.

The economic outlook from the continent still remains weak and the potential fallout from the Scottish Independence vote is draping uncertainty over the UK.

So until we get something unbelievably bullish that significantly changes the current paradigm, expect stocks to keep bouncing around in their current range.

Stock Market Trading

: 08 September 2014

Friday's US nonfarm payrolls data showed that the economy added 142,000 jobs in August against estimates for a rise of 226,000 jobs, with the unemployment rate falling to 6.1%.

Even if the results were taken with a pinch of salt as a possible one off event, investors speculated that the Fed will now refrain from hiking rates sooner than expected.

This encouraged the Dow Jones to add 32 points to a record closing price of 17,128.

Despite those gains, European traders are set to put the 'bad' NFP to one side this morning and instead focus on domestic issues.

If Sunday's plunge in sterling is any indication, jitters over the Scottish referendum could well take their toll on UK stocks, with the FTSE set to edge lower on the open.

I highly doubt that anyone has an accurate model of what Scottish independence would mean for England (or Scotland for that matter) but following the recent YouGov poll, it seems that analysts don't think it would be good.

Minds have started to wander and there are now suggestions that we could have a lame duck parliament following next year's election as we wait for all the Scottish MPs to extricate themselves from our political process in 2016.

In contrast, the DAX is set to gain significantly on the open as Thursday's surprise ECB rate cut continues to be a boon for the export led economy.

On the other hand, the CAC is expected to open flat as there are concerns that even ultra loose monetary policy can't compensate for the political circus in France.

With the Socialists in disarray, another poll has caused concern by showing that the far right Front National could gain significant ground in a national election.

By Jonathan Sudaria, 12 September 2014

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