US equities higher, Europe unfazed by VW issue and Greek election, ASX up 29 points

There was no shortage of volatility yesterday, with a 143 point range on the ASX 200, which finished around 40 points from its session lows at 5,066. Not a great start to the week, but considering the potential for adjustments following the US Federal Reserve noise last week, I'm satisfied to see the market remaining above the 5,000 mark. That said, I think it's high time this market started to move - it remains 930 points or 15.5% from its April 2015 highs and closed yesterday just 40 points above its 2010 high of 5,025.

This is a depressed market, and the saving grace is that we will be releasing the Rivkin Local October Blue Chip strategy late next week - so if you have unallocated cash that is destined for the market, we recommend using this as a way to get market exposure in your portfolio, while utilising our less-market-sensitive Income and Event strategies to provide insulation from market wobbles. Rivkin Local members should stay in touch with the construction of the Rivkin Local Model Portfolio by clicking here, everyone else should phone 1300 748 546 or email customerservice@rivkin.com.au to find out how to get involved.

In stark contrast, today's second chart shows the movements in percentage terms over the same period for the S&P 500 (in black, up 81.22%), the NASDAQ 100 (in orange, up 134.90%) and Germany's DAX (in blue, up 66.43%). Yes, the disparity is stark indeed! Sure, we have a commodity-linked economy that has been weighed down since China came off the boil to a greater extent than that of the US and most European economies; however, Australia hasn't managed to put on much of an economic showcase to attract capital in the last few years and I hope the new PM Turnbull and his new Treasurer can work with the RBA to ignite those 'animal spirits' that we so often hear about.

Today's last chart shows the negative correlation between the Australian dollar and the US dollar index since the Fed announcement last week, and you can see that after the US dollar index began to recover on Friday night, the Aussie has come under pressure and this has broken the short-term up trend that we saw since prices bottomed two weeks ago.

Finally just an anecdote regarding market confidence: I thought that the Greek election and the Volkswagen scandal (click here to read about it) might have been too much for already-frayed equity investor nerves last night. I was surprised to see markets higher this morning, and I see this as a sign of seller exhaustion. 


Source: Rivkin, Saxo Bank

To view the Rivkin economic calendar and Global Markets matrix, members can click here.

This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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