Oil stocks negatively correlated to market first time since 2001
BNN Bloomberg
Oil and gas equities are defying the broader stock market in a way investors haven’t seen in two decades.
Oil and gas equities are defying the broader stock market in a way investors haven’t seen in two decades.
The correlation between the S&P 500 Energy Index and the broader S&P 500 has gone negative for the first time since 2001, fueled by a combination of rising oil prices and a selloff in the tech sector. The energy index has climbed 39 per cent this year while the broader index has fallen 6 per cent and the S&P 500 Information Technology Index is down 10 per cent. Analysts say the divergence has historically preceded recessions.
“With oil prices going as high as they have, that’s going to be positive for energy stocks and negative for the rest of the overall economy,” Commodity Context founder Rory Johnston said in an interview. The last time correlation between oil and gas stocks and the broader market diverged this much, the Dotcom bubble burst, he said.
Correlation between energy and the broader market has been falling since the start of the year, but Johnston said the “phenomenon went into overdrive” since Russia invaded Ukraine at the end of February and sent oil prices above US$100 a barrel while introducing new geopolitical risk into the stock market.
The phenomenon also poses risks for investors when that correlation reverts to its historically positive relationship, particularly if higher energy prices spur inflation and then a recession.
Iran’s Supreme Leader Ayatollah Mojtaba Khamenei issued his first statement on the war on Thursday, saying that the leverage of closing the Strait of Hormuz should be used and that Iran will keep attacking its Gulf Arab neighbors. Khamenei also called on Gulf countries to “shut down” U.S. bases, saying promised U.S. protection is “nothing more than a lie.”
Iran’s Supreme Leader Ayatollah Mojtaba Khamenei says that the leverage of closing the Strait of Hormuz should be used and that Iran’s attacks on Gulf Arab neighbours will continue. His first statement since his appointment was read on state television Thursday by a news anchor.
Prime Minister Mark Carney is again heading overseas, this time to Norway to observe NATO Cold Response exercises as Canada deepens ties with Nordic countries.
The Canadian Security Intelligence Service says the threat level in Canada from Iran or its proxies has not changed since the war in Iran began nearly two weeks ago, while adding that threat-related activities are “likely to continue.”
Ottawa is letting an unnamed automaker import a higher quota of U.S.-made vehicles without tariffs because the company is selling and making more cars in Canada than first expected.
World shares tumbled on Monday, with Japan’s benchmark Nikkei 225 index plunging more than 5%, after oil prices spiked at nearly $120 a barrel, casting a shadow over economies heavily dependent on imports of oil and gas from the Middle East.
Prime Minister Mark Carney announced Sunday the date for three upcoming byelections.
The price of oil surged higher and showed no signs of halting its rapid climb a week after the U.S. and Israel launched major attacks on Iran that escalated into a war in the Middle East.
Scott Moe says Canada needs to separate its trade talks from its national security concerns when dealing with certain countries if it is serious about diversifying trading partners beyond the United States.
Prime Minister Mark Carney has landed in Japan on the final stop of a 10-day trip that also included Australia and India.
Prime Minister Mark Carney has landed in Japan on the final stop of a 10-day trip that also included Australia and India.
Prime Minister Mark Carney has landed in Japan on the final stop of a 10-day trip that also included Australia and India.
Prime Minister Mark Carney has landed in Japan on the final stop of a 10-day trip that also included Australia and India.