Oil futures plunged by as much as 6.8% this morning after producers failed to come to an agreement in Doha to limit supplies . Oil’s positive correlation with global equities has been a persistent drag on markets, and indeed Asian equities and global stock futures have started the week in negative territory.
Fig 1. shows the predicted impact of a -3σ (8.7%) plunge in oil using the Cross Asset FNA Correlations map. This shock is broadly negative to global risk assets, and red highlighted assets are most affected (with losses exceeding 95% confidence level VaR). The stress test also shows that US 20+yr government bonds would likely be the preferred safe haven asset (green highlight), with a gain of 1.2%.
Fig. 1. Oil predictive stress test using Cross Asset FNA Correlations
In this short video we explore the systemic impact of an oil plunge on global assets, using the Cross Asset FNA Correlations monitor.
Video 1. Analyzing oil’s systemic impact on global markets (3.13 min)