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30 Mar 2015
USD and equity market correlations shift – BBH
FXStreet (Barcelona) - Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, comments that the negative rates in Europe and subsequent equity inflow combined with the USD’s appreciation and concern on corporate earnings has resulted into a shift in the USD-equity market correlation.
Key Quotes
“The euro and the S&P are now positively correlated (percentage change). The 90-day correlation stands at 0.1. At the end of last year, it was at -0.32. The 60-day correlation is at 0.35 compared with -0.34 at the end of 2014."
“The euro remains negatively correlated with the Dow Jones Stoxx 600. The 60 and 90-day correlations are near -0.31. At the end of last year, the correlations was closer to -0.50.”
“Sterling's correlation with the S&P 500 also has reversed. On a 60-day basis, it was mostly flat in the early part of Q4 14, but turned clearly negative before the end of 2014, reaching -0.23 in January. It has recovered from the middle of the month, and today is near 0.30, the highest in nearly a year. The general pattern of the 90-day correlation is similar.”
“Sterling's correlation with FTSE has been even more dramatic. The 60-day correlation was negative through Q4 14, falling to -0.40 in December. It has gradually trended higher since, reaching almost 0.14 last week. The 90-day correlation has turned positive in the middle of March and today it is near 0.08."
“Meanwhile, it is interesting to note that sterling has become more correlated with the euro.”
"As the business cycles have come more disconnected, the correlation between the S&P 500 and the Dow Jones Stoxx 600 has generally trended lower.”
“The percent change in the dollar-yen rate remains positively correlated with the percent change in the S&P 500 but has diminished.”
“The dollar-yen's correlation with the Nikkei has weakened.”
Key Quotes
“The euro and the S&P are now positively correlated (percentage change). The 90-day correlation stands at 0.1. At the end of last year, it was at -0.32. The 60-day correlation is at 0.35 compared with -0.34 at the end of 2014."
“The euro remains negatively correlated with the Dow Jones Stoxx 600. The 60 and 90-day correlations are near -0.31. At the end of last year, the correlations was closer to -0.50.”
“Sterling's correlation with the S&P 500 also has reversed. On a 60-day basis, it was mostly flat in the early part of Q4 14, but turned clearly negative before the end of 2014, reaching -0.23 in January. It has recovered from the middle of the month, and today is near 0.30, the highest in nearly a year. The general pattern of the 90-day correlation is similar.”
“Sterling's correlation with FTSE has been even more dramatic. The 60-day correlation was negative through Q4 14, falling to -0.40 in December. It has gradually trended higher since, reaching almost 0.14 last week. The 90-day correlation has turned positive in the middle of March and today it is near 0.08."
“Meanwhile, it is interesting to note that sterling has become more correlated with the euro.”
"As the business cycles have come more disconnected, the correlation between the S&P 500 and the Dow Jones Stoxx 600 has generally trended lower.”
“The percent change in the dollar-yen rate remains positively correlated with the percent change in the S&P 500 but has diminished.”
“The dollar-yen's correlation with the Nikkei has weakened.”