Yesterday was especially difficult for stock markets, as the S&P TSX 60 (PARIS:TSX) and the S&P 500 both fell 2.3% and 0.73% respectively. The slide continues this morning, with big drops across Asia. It's safe to say that lower crude prices are causing a lot of turbulence in the markets.
In addition to having a major impact on the public finances of the main producing nations and the balance sheets of energy-related companies, this correction is now also affecting the financial and industrial sectors. It should also be noted that many companies have used the HYB market to obtain funding, and that energy represents 15% of this asset class. A continued bearish trend in crude-oil prices could bring about several company bankruptcies and some sovereign debt defaults, as Venezuela is suffering badly right now, and this is widening credit spreads significantly. Venezuelan bonds maturing in 2027 are currently yielding 20.2%. The current environment is cause for major concerns, and could be used as a pretext for more profit-taking. It is interesting to note that despite the drop in crude-oil prices, the loonie is the G10 currency that has fallen the least against the greenback in the past six months.
Have a great day!
Emmanuel Tessier-Fleury
- Range of the day: 1.1410 - 1.1510