1. Winners and losers from an oil spike.

2. Chemicals are very sensitive to energy prices.

3. Japanese equities pricing in excessive risk from high oil prices.

Japanese equities fell by 8% over the past three days. It seems the market has priced the WTI crude at $100/bbl and the price staying at that level for some time.
Even with the oil price shock from the Russia- Ukraine war, which has lasted for four years, Japanese equities have done well thanks to earnings growth and P/E expansion driven by the start of corporate reform. We estimate 2026 EPS growth of 10% YoY and a P/E of 17x.
We assume the inflationary impact of high oil prices will be manageable and benefit corporate earnings, as in the past. We expect Japan’s market to return to levels before the Iran conflict on improved sentiment, a swing to positive real income growth, full-year earnings results, and progress on corporate reform.

4. The banks selloff looks mild, so far.

5. Salesforce CEO Marc Benioff says he “can’t really understand” the software stock selloff.

“I’m following hundreds of stock myself,” he says. “And I can’t really understand it. I don’t understand why, all of a sudden, you get to a perspective where revenue doesn’t matter, margin doesn’t matter, RPO doesn’t matter, cash flow doesn’t matter”
“When those things are happening, that’s when you know there must be a major dislocation”

Meanwhile, the software sector may have found a floor.

The IGV has formed a double-bottom pattern and an inverse head-and-shoulders pattern, indicating a potential trough.

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