Our market is poised to start the week with another bout of weakness and we can blame the crash in the oil price for the sour sentiment. The S&P/ASX 200 (Index:^AXJO) (ASX: XJO) is poised to follow the S&P 500 index lower as the more than 6% drop in the Brent crude price to a one-year low of US$58.80 a barrel sunk energy stocks on the US market. Falling oil prices may be sapping risk appetite but it’s actually what our market needs to give the Santa Rally a bit of a kickstart. The prices at the bowser on the…
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Our market is poised to start the week with another bout of weakness and we can blame the crash in the oil price for the sour sentiment.
The S&P/ASX 200 (Index:^AXJO) (ASX: XJO) is poised to follow the S&P 500 index lower as the more than 6% drop in the Brent crude price to a one-year low of US$58.80 a barrel sunk energy stocks on the US market.
Falling oil prices may be sapping risk appetite but it’s actually what our market needs to give the Santa Rally a bit of a kickstart.
The prices at the bowser on the weekend hasn’t been this low in a very long time and while that may not be good news for the likes of the Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO) share prices, several other sectors will benefit from the lower fuel price.
Having to pay less for fuel works similar to a government stimulus, such as a cash handout, as it puts more in the pockets of consumers and lowers the costs of business for a wide range of industries.
One sector that will be cheering is retail. The close to 30% drop at the bowser over the past week or so will put wary consumers back in the spending mood.
It’s too early to tell how well retailers have performed during the Black Friday weekend sales promotion but I suspect it won’t be too shabby as the downtrend in the oil price puts extra cash back into household budgets.
The lower petrol price is also a boon for our stressed-out banks with the National Australia Bank Ltd. (ASX: NAB) share price, Westpac Banking Corp (ASX: WBC) share price and Australia and New Zealand Banking Group (ASX: ANZ) share price all struggling to regain favour with investors.
The easing pressure on wallets from the lower fuel price (assuming the trend persists) will be a welcomed relief as households struggle with record high debt.
Logistics-related stocks are another group that’s set to be big winners as falling oil prices will pad profit margins at a time when cost pressures are rising.
But be warned. The market is unlikely to view the oil price plunge in a positive light in the immediate future although I think they will come around to this conclusion in a few weeks.
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Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Brambles Limited, National Australia Bank Limited, and Westpac Banking. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.