FYI | May 31 2010
By Chris Shaw
Australian equity prices may struggle in June if history is any guide, Barclays Capital noting the All Ords historically posts its worst median returns for the calendar year in the last month of the financial year.
South Africa's JSE All Share index also tends to have its toughest month of the year in June, while elsewhere Barclays suggests the FTSE100 has only around a 40% chance of gaining this month.
In contrast, Asian markets tend to outperform for the month and the group suggests India's Sensex and the Nikkei and TOPIX in Japan have better than 60% chances of closing the month higher. Barclays gives the Dow Jones just a 48% chance of gaining this month and notes it is on a five-year June losing streak, while for the NASDAQ Composite it suggests there is a 59% chance of ending the month higher.
In the commodities sector, Barclays notes copper has the highest median return and offers the best odds for a rally this month at 63%, well above the odds it gives to aluminium of just 45%. Precious metals also tend to struggle and Barclays sees no change to this trend with gold given a 43% chance of gaining and silver a 33% chance.
In contrast, oil is more an even money bet to gain this month in the group's view, while natural gas should find the going tougher as Barclays gives it only a 42% change of ending June higher.
June tends to be a good month for the euro as Barclays notes it tends to enjoy positive returns against a range of currencies such as the British pound, the Japanese yen and the US dollar. It expects this year will be no different and gives respective odds of advance this month of 54% to 64%.
The US dollar tends to struggle in comparison as median returns against other major currencies are negative, a broad trend expected to continue this June. This should also see the Australian dollar benefit as Barclays gives it a 56% chance of gaining on the greenback this month. In contrast the group suggests the New Zealand dollar has a 49% chance of gaining on the US dollar.
June tends to be the most bullish month for US 10-year bonds, so Barclays suggests these securities have only a 46% chance of a yield increase this month. Similarly, both Australian and New Zealand 10-year bonds are given a slightly less than even money chance of yield gains this month.
In contrast UK, Japanese and European 10-year bonds are all seen as slightly better than even money to deliver yield increases this month, while Barclays notes German yields in June tend to be bearish across the curve.
With respect to yield curves, Barclays notes there are pronounced steepening tendencies in Japan and flattening tendencies in the US, while on relative value terms the group notes June typically delivers strong outperformance of US 2-year bonds against their European counterparts.
