Despite a brief jump in the oil price due to some Middle East tensions the near term outlook for the oil price isn't inspiring. Likewise with talk of a potential recession and the stance of the Reserve Bank of Australia it would appear more likely than not that another interest rate cut lies ahead.
It's pretty obvious that oil producers such as Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO) have been suffering from weak oil prices. The clear losers from low interest rates aren't so obvious. However, lower rates do make it harder for banks to maximise the all-important net interest margin.
Who are the winners?
While the market might seem to focus on the losers in the low rate scenario, there are also companies which benefit. Here are a few to consider…
Discretionary retailers are a big beneficiary of both lower oil prices –which correspond to lower petrol prices – and lower interest rates. Both effects make consumers feel wealthier which makes them more willing to spend. This stands companies such as Super Retail Group Ltd (ASX: SUL) and JB Hi-Fi Limited (ASX: JBH) in good stead.
Meanwhile, another industry which can benefit from lower interest rates is housing and related sectors. Lower rates make borrowers more comfortable to take on a mortgage which can lead to higher rates of home building, which is great news for firms exposed to new home construction such as brick maker Brickworks Limited (ASX: BKW).
Likewise, increased property sales in general thanks to lower rates often mean new furniture and home fit-outs. Companies such as furniture retailer Fantastic Holdings Limited (ASX: FAN) and Harvey Norman Holdings Limited (ASX: HVN) are key beneficiaries from higher home sales and builds.
Lastly, one of the most leveraged businesses to lower oil prices is Qantas Airways Limited (ASX: QAN) whose share price is trading near a multi-year high as it enjoys a corresponding benefit from lower fuel prices.
