Yes, Canadian investors, we know you know oil. Energy accounts for more than a quarter of the S&P/TSX Composite index. And where crude goes, the loonie goes 80 per cent of the time, according to a study by Investopedia.
But what about the rest of the world? If you want to know what global equities will do tomorrow, you can increasingly look at the price of oil to figure that out as well.
Thirty-day rolling correlations between the MSCI world stock index and U.S. crude oil have hit minus 0.4 percent, levels last seen in early 2008, according to Reuters data. This means global stocks fall when oil rises (the opposite of what we see here in Toronto), and the link is the strongest it has been in three years.
And what about the impact of energy prices on economic growth? Reuters calculations show world GDP growth will halve to 2.1 percent in 2011 from current projections only if Brent crude oil reaches $150 (U.S.) a barrel, a 30 percent increase from Friday's prices. Oil will have to reach as high as $191 to completely wipe out world growth.
Sonali Verma