Although no one paid attention, crude oil prices fell by more than 11% from the beginning of August. You can only imagine what the hustle and bustle of financial media would be if the big stock indices gave up so much in just over two weeks.
In addition, if the rise in oil prices for high prices after the US attack on Iranian nuclear plants on June 22, $ 78.40, the decline is even higher, more than 20 % – the market area.
At the same time, large stock market indices, such as the SPDR S&P500 ETF Trust and the Global Ishhas MSCI ACWI ETF, have continued their fluidized near the highest heights of all time and have a little signs of immediate drawback.
Let’s look more closely at what drives lower oil prices and its effects on stock market prices.
Oil prices have fallen by more than 10% in August. Theestreet
Oil exposure to countless factors that control the price, there are several key relationships between oil and other global markets.
The most important financial connection is that oil prices act as a proxy for the overall energy requirement. Global energy demand, in turn, is greatly influenced by global economic growth conditions and expectations.
It should be noted that oil is a nicely balanced market with future news, such as geopolitical crises or attacks on oil infrastructure, is caused by extreme prices.
From a tactical point of view, such price transfers can give active investors a chance to buy at price levels that they may not see anymore. However, this year’s fierce environment, lower prices, talk about the use of border orders to limit losses instead of buying or selling in the market.
Although it is unlikely to trigger the price increase because there is no one indicator of defining, global demand is best measured by taking into account several key indicators, such as GDP, ISM manufacturing data and OECD world economic forecasts.
Unfortunately, these indicators have moved to the southern direction in recent months.
OECD GDP estimates paint a picture of the weakening global economy.OECD & SOL; Thestreet & Com & Sol; Brian Dolan
US actual GDP is currently predicted to be 2.5% per year during the third quarter, whereas according to Atlanta Fed 2.6% of the monthly level GDP detector.
Separately, as shown in the table above, the Economic Cooperation and Development Organization (OECD) predicts only 1.6% GDP growth in the United States in 2025 after 2024 after 2024.
OECD data from other key economies are similar:
The growth in the euro area is expected to remain anemic by 1 % (1.3 % forecast of December 2024).
China is expected to receive GDP growth by 4.8%, which has slightly decreased monthly to 4.9%and what is crucial that the government’s target is 5.0%annual GDP growth.
ISM manufacturing indices are also worrying:
Although the number of ISM titles may be at their worst level earlier in the year, leading sub -components, such as renting and new orders, continued to do weakness.
On the equation side of the equation, OPC+ populations (organization of oil -legged countries plus significant non -OPEC suppliers such as Mexico and Malaysia) have increased production levels as part of the surgery in previous years.
More financial analysis:
This coming weekend, OPEC+ ministers are expected to accept extra 0.548 million barrels per day (BPD) in production, which is about 2%increase. This increases the fears of potential oversupply in the face of weakening demand, which is likely to lead to a decrease in oil prices.
The upcoming meeting may have been the reason for the price difference in the lower West Texas intermediate (WTI) to start a week in the table below.
The chart shows a picture of a crude oil (WTI) candle chart with a fixed burgundy line showing global stocks ACWI -stock index ETF with Ichimoku cover.
When Proposed at the beginning of AugustNet balance of influences is oil price negative and price diagrams support the price falling below Ichimoku Cloud, now resistance of $ 66.85 in WTI (CL1).
Oil prices and shares are different TradingView & Thestreet & Episode? Com & Sol; Brian Dolan
Alternatively, a lower price difference may be « explosive » so far, which means that prices may recover in the short term for better sales.
The immediate disadvantage remains in the game, while the $ 63.28 Tenkan line (light blue line, fast moving average); Above you can see the recovery of the Kijun line for $ 66 (and fall) (red, slower moving average), while the bottom of the cloud is still 66.85.
For WTI, a large round psychological support for $ 60 is now in reach and is likely to become a market goal. Because the RSI reading is about 40, the drawback is even more space for running, which means that prices have not yet been overloaded for the drawbacks.
Historically, oil prices and warehouses have had a positive relationship, which means they tend to move in the same direction. However, positive correlation is relatively minor, only +0.3 – +0.5 in the long term, according to price information.
Still, according to a recent report by the CME group, the S&P 500’s equity index has been 70% correlated with WTI raw oil daily movements for the time being this year. This is the highest correlation for all moving 30 -day period since 2012. One -year correlation has risen to the highest level since 2013.
All in all, weakening global demand and weaker energy prices make sense. As the new highest ever -continuing continues, the continuation of the global slower growth suggests that something has to be given.
Individual shareholders are influenced in different ways. For example, if shares begin to decrease in general, sectors that benefit from lower energy costs may decrease relatively less than those with negative oil prices.
In particular search for transportation (ShowersIn discretionary (Xly –In Industry (former energy) (XliIn and even technical stocks (XLKIn Probably beneficiaries of lower energy prices.
The largest loser is clearly energy industry (XleIn For itself, whose profitability is directly tied to the price of oil. Other losers may be in oil field services (YesIn average current/pipeline services (AMLPIn and materials (XLBIn . Strangely enough, banks (KbwbIn It may also be the loss side due to recent recent borrowings for oil -sensitive companies, as default risks increase during decrease in oil prices.
In short, if oil prices remain under pressure, which seems likely, the stock should be in the alarm that the stock prices are lower and the differentiated view is based on lower vulnerabilities at lower oil prices.
