04/03/2016 - 06:13

Is there a current Correlation between US Stocks and Inflation?

04/03/2016 - 06:13


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The current correlation between crude oil and US stocks is ~91%, according to Bloomberg. This means that as oil moves higher, global stocks “should” rally… but what is the correlation between US stocks and inflation? The week that was….

Is there a current Correlation between US Stocks and Inflation?

Good Morning,

Happy Friday…..

Another week goes past and it’s already the 4th of March…

Soon, like the yanks, we will be able to drink on the streets?

So how did we go this week on markets?

Generally very good…..

Global markets are up ~ 8-10% off their lows (once again, we Aussies are up only ~ 4%-5%), but hey, this is a good thing, right?

It appears that just like there is almost a 91% correlation between crude oil and Global stocks, US stocks are moving along with inflation expectations….


Well as global growth picks up, so does inflation… and historically, markets rally on anticipation that global growth is improving.

Does this mean that global central banks will start to raise interest rates anytime soon?


Last night, US Stocks were mostly “flat” as the Dow Jones +17 points was slightly higher as crude oil rebounded.

The USD was sold off, which overall, is positive for commodities…. Data today showed the number of Americans applying for jobless benefits unexpectedly climbed last week. Data due tonight is estimated to show payrolls increased by 195,000 in February.

So the payroll figures tonight are important….

“Investors are clearing the decks ahead of tomorrow’s jobs report,” said Alan Gayle, senior strategist for Atlanta-based Ridgeworth Investments, which oversees about $42.5 billion. “It’s encouraging that the market has been holding onto gains and consolidating, so modest declines don’t bother me. People have been dismissing inflation as a non-event in 2016, and the evidence suggests it’s moving higher this year.”

So… What's on today?

Local data: Retail Sales Jan (11.30am)

Overseas data: US February jobs report. US trade balance (Jan.), Canada trade balance (Jan.), Italy GDP (fourth quarter), Swiss central bank annual report. U.S. employers probably accelerated hiring in February, while the jobless rate held at an eight-year low of 4.9 per cent, economists project the Labor Department to report. Hourly pay is forecast to rise at a slower pace after climbing in January by the most in a year. 8.30am in Washington.

Overseas earnings: Staples, Embraer, London Stock Exchange Group

Stocks in focus

BHP Billiton's credit rating was cut by Moody's as lower commodity prices continue to weigh on the world's biggest mining company.

The SPI is up 4 points this morning.



Niv Dagan is an Executive Director of Melbourne based boutique funds management and corporate advisory firm, Peak Asset Management (www.peakassetmanagement.com.au). He is also a regular financial commentator on Sky Business.


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