European and US markets lift significantly, ASX futures 78 points higher

ASX 200 index futures have lifted above two-month highs to be sitting back at mid-August levels, before this year's volatility storm hit. This is very positive for Aussie stocks as it lifts the index level above the selling resistance that it was previously experiencing and now puts it in alignment with the US S&P 500, where it too is sitting above buying the September/October buying support and eyeing off an entry back into the previous 2015 range that existed before August.

The equity rally did not have the effect of weakening the US dollar as might normally be the case, as the anticipation of a better market environment will only fuel rate hike speculation in the US and therefore tease our US dollar buying. As a result, the Australian dollar did not rally last night and sits just above US$0.72.

The big event for this week was always going to be last night's European Central Bank (ECB) rate decision (unchanged as expected) and the accompanying comments from the ECB president. The market has read President Draghi's comments clearly as a sign that the ECB is inclined to buy assets more aggressively later in the year. Traders tried to jump ahead of the move, buying up stocks and sending Germany's DAX 2.48% higher in anticipation that the breadth of the ECB's stimulus programme would have an immediate impact on corporate sentiment, with cheaper borrowing costs for companies and governments still to come.

**Please note that I will be travelling for two weeks from Monday 26 October, so morning coverage will be intermittent during that time**


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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