LONDON Crude oil has this year shown the most marked correlation to equities in decades and at the same time displayed a negative correlation to the dollar.
U.S. crude has shown a daily correlation of 0.88 with the MSCI world equity index .MIWD00000PUS since March 9, when the index touched its lowest since 2003.
"It depends how you measure it, but we are currently witnessing one of the strongest sympathetic periods in four decades, particularly with regards to the correlation between oil and the stock market," said Francisco Blanch of Banc of America Securities-Merrill Lynch.
On March 10, Citibank (C.N) Chief Executive Vikram Pandit said the bank, which suffered some of the most severe write-downs of any institution in the financial crisis, had been profitable in January and February.
Market participants construed Pandit's remark as a sign of stabilization, buttressed by enormous fiscal and monetary stimulus measures from the United States, Europe, Japan and China, along with improving consumer sentiment data, falling manufacturing inventories, and lower interbank lending rates.
Below are some key daily trading pairs between March 9 and July 31. A value of 1 means a perfect correlation, a value of 0 means no correlation, and a value of -1 means a perfect negative correlation:
Dollar World stocks 10-yr U.S. treasuries .DXY .MIWD00000PUS U.S. crude -0.92 0.88 0.92
Below are the trading pairs between December 1, 2008 and March 8, 2009, a period when oil dropped below $40 a barrel:
Dollar World stocks 10-yr U.S. treasuries U.S. crude 0.11 0.01 0.23
Below are the same daily trading pairs between September 15, the day Lehman Brothers filed for bankruptcy protection, and December 31, 2008:
Dollar World stocks 10-yr U.S. treasuries U.S. crude -0.6 0.88 0.73
Here are the same daily trading pairs a year earlier, between September 1, 2006 and June 1, 2007, prior to the onset of the financial crisis:
Dollar World stocks 10-yr U.S. treasuries U.S. crude -0.47 0.18 -0.07
(Reporting by Catherine Bosley and Barbara Lewis; Editing by Sue Thomas)