16 June 2008

High Oil Prices Affect Economies and Stocks

China's Shanghai Composite is still by far the worst performing index at -45%. China is followed by India, Hong Kong, Italy, France and Germany. The US has held up relatively well, ranking 6th out of 21 countries analyzed in terms of market performance. Mexico, Brazil, Canada and South Africa are the only countries with positive stock market returns. __Source
China is the tail that is wagged by North America and Europe. If the developed world catches cold, China gets pneumonia. China's huge demand for oil has helped drive world prices higher, which has rebounded back to hurt China's stock markets and bottom line. China subsidises fuel costs for consumers and industry, and has been stockpiling oil supplies in the lead up to the Olympics. Both policies spur demand and lead to higher fuel costs.

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