Here’s a useful take from Citi via the SMHblog:
‘‘As one would expect, (oil producers) Russia, Norway, Canada and Brazil are amongst the markets with the highest correlations: they underperform when oil prices fall, and outperform when oil prices rise,’’ Citi notes, adding that it’s only looked at returns in $US, meaning a big portion of the out- or underperfomance plays out through the currency markets.
‘‘On the flipside, US and Japan seem to outperform the global benchmark when oil prices fall,’’ Citi continues. ‘‘We think this is partly because of the defensive nature of the US and Japanese equities. Japanese stocks are defensive in $US terms, as yen usually strengthens in a risk-off environment.
‘‘Japan also benefits from lower oil prices as it a big energy importer, especially after the earthquake and the shutdown of nuclear power plants.’’
Citi also notes that it’s expecting global economic growth to pick up next year, in line with rising global equity markets.
‘‘This suggests that the recent fall in oil prices is more supply, than demand related,’’ Citi says. ‘‘A demand related drop in the oil price would be more troublesome for global equities.’’
