US equities resume their rally, Europe mostly higher, oil, silver and gold all lower, ASX futures up 4 points

Last night's US stock market performance was telling of the unfazed mood among equity investors in the face of volatile commodities markets. And why not? Sure there are oil companies and oil-producing economies that are suffering due to the low oil price just as Australia suffers with a low iron ore price, but lower energy prices and commodity prices in general lowers the input prices for manufacturers in the US and it gets the inflation monkey off the back of that economy, meaning there's no rush to raise rates.

While this might seem a very short-term and superficial view, it is something that I believe will continue to drive confidence in US equities. While Europe is treading the fine line between being in a position where it can benefit from stimulus triggered by almost-zero inflation, it needs consumer demand and not cheap money. The US has consumer confidence trending higher and is enjoying annualised GDP growth of around 4% versus Europe's 0.8%. With interest rates so low in the world's major destinations for investment (US, Europe, Japan), investors have to take risk in order to pay for their liabilities and on a relative basis, if Europe is looking sick and Japan is an experiment, then the US will be favoured.

Today's first chart illustrates the difference between an economy benefiting from current commodity-related terms of trade (where import prices for raw materials benefit its export sector) and one that doesn't (where it exports raw materials and manufactures little to take advantage of the reduced input prices), showing the performance disparity between the US S&P 500 (black line) and Australia's ASX 200 (orange line). Look at the moment when investors gave up on Australian equities and realised that our economy was ripe to be decoupled from that of the US.

While Rivkin's domestically-invested Local portfolios are balanced very well and are outperforming the sell-off, we also have the luxury of exposure to US equities through our Rivkin Global advice product and Rivkin Trader dealing product. I urge anyone who looks at this chart and gets jealous of US equity performance to do something about it by contacting a Rivkin Relationship Manager on +61 2 8302 3600 or and enquiring about how they can trade this market successfully.

Lastly on today's second chart I've shown the daily movements of the price in WTI crude oil (black line) and US dollar spot gold (orange line). While both of these commodities have been in the headlines, gold continues to punch above its weight as far as headlines and the effect on producers are concerned. Relatively mild swings in this shiny metal get investors trading wildly, as we've seen in the price action of gold stocks in the last few sessions. For those of you looking to find listed companies by commodity exposure, there's a very handy publicly-available website called Mining Feeds that you might want to check out - It's a perfect companion for those traders with a keen interest in commodity stocks and a Rivkin Trader dealing account.

Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: AU AiG performance of service index at 9:30am, AU GDP at 11:30am (3.1% year on year expected), Chinese and Japanese PMI prints between 12pm and 12:45pm, Swiss GDP at 5:45pm, Canadian rate decision out at 2am, US non-manufacturing ISM at 2am, all Sydney time.

comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice and dealing services on securities, derivatives and superannuation (SMSF). Rivkin also provide SMSF administration and accounting services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.