A quiet Friday night gives the ASX a 12 point lead*, expect quiet trading until other Asian or US markets start to move

European and US markets were relatively quiet on Friday night, and trading will likely be tentative until the volatility returns. *Today's first chart is an important one, the blue line shows when the ASX SPI 200 futures stopped trading on Saturday morning, leaving the US S&P 500 futures in black to trade lower and thus we can likely expect a softer start this morning than what is otherwise indicated by the 12 point lead. At the time of writing S&P 500 futures are about 0.7% softer than where the ASX futures left off, which might give us a ~37 point adjustment to be down by 25 points or so rather than up by 12. But let's see what happens at 10am.

While the volatility of the past 10 days or so has died down for now, the real niggler for the market--is the Chinese economy in more trouble than we think--remains alive and well and was reportedly hotly-debated at the US Federal Reserve's Jackson Hole policy summit over the weekend. The world is having a tough time figuring out how Europe will emerge with regard to consumer and business sentiment after its troubles, whether the US can maintain growth and manage its monetary policy without growing economic imbalances with regard to inflation, and how developed economies will grow to feed emerging markets, like China, which, in turn, will feed the outlying high-growth stats for aggregate global GDP growth to be on target. As we always point out, however, these are macroeconomic themes that do not always affect the micro-economy; and therefore, the best that those investing in equities can do is focus on a) allocating an amount of cash to the equity asset class that leaves them feeling comfortable; and b) selecting companies or events that they like and understand, therefore leaving them with less uncertainty about their holdings when markets rattle.

In today's second chart I've shown how the consistent down-trend in copper has managed to steadily underpin the emergences of sell-offs and volatility in other markets, acting as a beacon to bearish investors. A great proxy for Chinese economic health, copper is making some very preliminary moves sideways out of its trend-channel and should be a key focus for investors who are being left none the wiser by the noise from economists and policy-makers with regard to the medium-to-long-term health of China. Let's remember that China has made a lot of policy changes this year and is waiting for them to gain traction and kick in. I'm not sure anyone will know how successful they will be until the results are felt by its trading partners.


Source: Rivkin, Saxo Bank

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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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