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UK Stock Market Stymies Awaiting a US Rate Hike in September

Renee Blakely

SPY and EWU Hobbled by Fed's Rate-Hike Indecision Following September 4 US Employment Report

(Continued from Prior Part)

EWU loses previous day’s gain

September 4, 2015, saw rises in none of the 109 constituent stocks of the iShares MSCI United Kingdom ETF (EWU). Glencore (GLEN), the top gainer on September 3, lost 5.96% on September 4.

The stocks at the bottom on September 4 were Anglo American (AAL), Tullow Oil (TLW), and Glencore (GLEN), who yielded -7.79%, -6.92%, and -5.96%, respectively. The recent fall in oil prices and a global slump in basic material demand affected these stocks in the mining and energy sectors.

The graph below shows the price movement of the iShares MSCI United Kingdom ETF (EWU) for the past week.

US job report induces uncertainty

Mining sector stocks like BHP Billiton (BHP) and Rio Tinto (RIO) fell by 5.23% and 4.53%, respectively, on September 4. In oil and gas stocks, BP (BP) and Royal Dutch Shell (RDS.B) fell by 5.04% and 3.36%, respectively, on September 4, 2015.

The most recent US Bureau of Labor Statistics’ employment report had positive figures for the US domestic economy, but the numbers were not strong enough to initiate an interest rate hike by the Fed. The uncertainty surrounding this decision—or lack thereof—impacted UK investors amid the financial turmoil in China, which has weakened the euro against the US dollar. Recent slumps in demand for oil and commodities around the world, as well as the fall in Germany’s factory orders by 1.4% in July, have also affected UK investors.

The ECB (European Central Bank) is inducing liquidity in the European region. However, the ECB is taking its time to bear the fruits of increased economic activity for the region. The volatility in the UK stock market is expected to prevail until the US Fed’s decision on the rate hike. The Fed is expected to clarify its next move in its upcoming September meeting.

For more details on the global equity markets, read our series “Is a Recession Coming?

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