Global equities and commodities sell off, US dollar strengthens at the expense of other currencies, ASX futures down 47 points

We've been discussing a potential pull-back equities for a while now, with particular regard to the ASX 200 (orange line, first chart), which has had a stunning 2015 run to date. The last few sessions have taken us from intra-day highs of 5996.7 last Tuesday prior to the 'hold' rate decision from the Reserve Bank of Australia, to what will likely be a range of somewhere between 5,750 and 5,800 today. As I've said many times, a healthy pull-back now will allow a more sustainable up-trend to form, should that be what the market has in store for investors. I maintain that Australia's appetite for dividend income will continue to favour the higher yield areas of the ASX 200 and any global equity headwinds will only strengthen the resolve of income investors given the RBA's propensity to respond with lower rates, thus increasing the pressure to take on risk.

The US dollar's strength, illustrated in today's second chart (orange line) in percentage terms versus the Aussie dollar (black) and euro (blue), was a dominant theme last night. Here you can see the movement since the trend took hold in mid-2014, with Aussie and euro weakness roughly being dealt out in equal measures to the strength of the US dollar. Given the US dollar remains the global base currency for just about everything, global assets such as commodities and major currencies fade during a period of US dollar strength and this will benefit countries the most who have favourable terms of trade, meaning that the value of their exports is much greater than the value of their imports. The fact that Australia's commodity exports have suffered due to falling demand hasn't helped us much, so it will be the services (like education), technology, manufacturing and tourism sectors that will benefit for continued Australian dollar weakness. In addition to this, surging asset prices (or recovering to say the least) in the more stable parts of Europe as well as lofty US equity markets will be supportive of corporate takeovers of Australian companies by foreigners. For those with an interest in takeovers, Shannon and I will be discussing what to look out for in an upcoming video that will feature in Rivkin's blog.

Today's last chart shows the price of US dollar spot gold (XAUUSD), still experiencing a down-trend that has been in place since mid-January. This could be setting up to be a low risk buy on the basis that there may be buying support from the November 2014 lows, so medium-term gold traders might like to pick their entries and then locate stops either at, or just below, the US$1,140 level. Iron ore at US$58.15 per tonne has been testing the patience of Fortescue Group (FMG) shareholders recently, thanks to RIO and BHP's relentless supply; however, decreased Chinese demand (even from this point) may suggest that we've seen a peak in production levels, which would deter the bigger producers from continuing to pursue economies of scale through high production. The AFR has a story this morning quoting the President of the China Metallurgical Industry Planning Association saying that Chinese demand would fall by 1 percent this year and steel production would remain at current levels for the next five years. This is probably one of the more optimistic views going around, with other analysts suggesting a 10% dip in demand to come.

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Today‚Äôs 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: Westpac consumer confidence out at 10:30am, AU home loans and investment lending at 11:30am, Chinese retail sales at 4:30pm, RBNZ's rate decision at 7am tomorrow morning (no change expected), all Sydney time.

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