FYI | Dec 02 2008
By Chris Shaw
Equity investors have had many reasons to believe in Santa Claus given the traditional Christmas rally in share prices and while this year the month has not started off well, Barclays Capital’s analysis of monthly trends shows both median and average returns have a decidely positive skew in December.
The Toronto Stock Exchange has been the best with 11 straight years of December gains and the FTSE has risen for five straight years, while Barclays sees all exchanges having a better than 50% chance of posting a gain this time around with the exception of the Shanghai Composite index.
India’s Sensex Index and the FTSE are regarded as having an 83% chance of finishing this month higher, while the Dow Jones and S&P500 indices are rated around 70% chances, the All Ords 75%, but the Nikkei just a 63% chance and the NASDAQ Composite and Germany’s DAX just 57% chances of gaining.
Similarly base metal prices generally perform well in December, the group noting aluminium tends to be the standout with a median gain of 1.86%. It gives the metal a 71% chance of gaining this time around. Copper is rated as only a 50% chance of finishing the month higher, while both gold and silver are rated as slightly higher than 50% chances of gaining.
While natural gas traditionally struggles this month Barclays estimates there is a 51% chance it gains this time, which is a little better than the 47% chance the group ascribes to the oil price moving higher this month.
According to Barclays Capital, the euro has good odds of an advance this month and historically it does so, as evidenced by its six year bullish run against the British pound. Even more likely in the group’s view is the euro gaining against the yen, where it ascribes a 73% chance, while the US dollar is estimated to have a 54% chance of gaining against the yen but only around a 40% chance of moving higher against the Australian or New Zealand dollars.
December is traditionally a bullish month for global fixed income, the group estimating only New Zealand 10-year, US 2-year and 3-month euroyen securities carrying a better than 50% chance of delivering a yield increase this time, while Swedish and Canadian 10-year securities are seen as least likely to see yields increase. According to Barclays the odds this month are modestly in favour of a steepening in yield curves.
