Equity and Oil Correlation

As oil remains at higher levels, the correlation of crude oil and equity markets are slowly receding. IN last couple of year, the correlation has moved from negative to positive and now the correlation seems to reducing. Circa 2008, when oil made a high of $ 147 . the corrleation was negative as the highger crude prices were squeezing profit margins of companies and stoking inflation. but in 2009 when world was struggling with recession, oil and equity markets had strong positive correlations as better economic scenario meant more demand for crude.

WTI-Brent Spread Widens.

WTI brent spreads has again widened to record levels. The Brent-WTI price differential held above $22 per barrel on Friday after a dismal non-farm payrolls number and neared its record high of $23.34 set on June 15.

While both benchmarks have historically traded within dollars of each other, the price differential is “here to stay”. Data shows that stocks at Cushing remain 37% above their 5-year average at 37 million barrels. this oil glut has created a pressure on WTI which looks much weaker compared to Brent.
Tension in Libya does not seem to end anytime soon.with ramadan approaching Nato will have to stop the attack on Gaddafi forces, which elonagates the civil war for one more month. Nato also attacked Libya's Oil installation to starve gaddafis without oil. All these factors are creating upward pressure on Brent.

At the same time, rising hostilities between oil producer’s cartel OPEC and IEA, the west’s oil watchdog, have made the market nervous

these factors will create will not let WTI Brent spreads to recover anytime soon

GDP and Recession

An interesting data, Whenever real GDP growth of US falls less 2 %. It is followed by a recession.
Amercian GDP growth is very much near that pivotal 2 % mark. if GDP shrinks any further, a deep slowdown may be in offing

USD vs Stocks

Historically US Dollar and equity markets share a negative correlation. USD after making a low, is showing some strength and might bounce back. this is not a good sign for equity market whcih is already on its weaker side. any appreciation is USD can bring a decent correction in equity markets