FYI | Dec 02 2010
By Chris Shaw
As with November, Barclays Capital notes December is historically a bullish month for equities, the Shanghai Composite Index being the only exception to this trend. Both India's Sensex and the TSX in Canada are on eight-year bullish streaks and Barclays gives both a better than 80% of gaining again this year.
The FTSE in the UK is also given an 83% change of a gain this month, while Australian equities should also do well given Barclays ascribes a 75% chance of the All Ords advancing this December. Of the major markets Asia looks likely to lag, Barclays giving the HangSeng a 69% chance of a gain this month and the Nikkei a 63% chance.
Turning to commodities, Barclays notes aluminium tends to perform well in December, posting its second best month of the year. In contrast, natural gas tends to struggle to end the year and historically has weakened in December.
This year Barclays gives aluminium a 71% chance of gaining for the month, the next best being oil at a 52% chance, gold at a 51% chance and copper at a 50% chance. Natural gas is ascribed a 47% chance of gaining, while Barclays gives silver only a 46% chance of closing the month higher.
On foreign exchange markets December tends to be good for Sterling, the New Zealand dollar against the US dollar and the euro in general. Barclays suggests the highest odds of an advance this December are for the euro against the Japanese yen at 73%, followed by the Kiwi dollar against the US dollar at 62%. The British pound is given a 59% chance of gaining this month against the US dollar.
US dollar performance looks likely to be mixed as Barclays gives it a 54% chance of gaining against the yen, while both the euro and the Australian dollar are given near 60% chances of finishing the month higher against the greenback.
Among fixed interest securities Barclays notes December tends to be the worst month of the year for New Zealand 10-year bonds, while Swedish 10-years, 3-month Libor and Euribor securities typically have their best month.
Most likely for a yield advance according to Barclays are 3-month euroyen securities at 58% and New Zealand 10-year bonds at 52%, while Canadian 10-year and Swedish 10-year bonds are given only respective chances of 26% and 22% of yield gains at the long end of the curve. At the short end 3-month Libor and 3-month Euribor securities are both ascribed 26% chances of a yield increase for December.
With respect to yield curves, Barclays notes US 2-year versus 10-year securities are on a three year steepening streak, while the group gives EU 2-year versus 10-year securities a 63% chance of steepening this December.
A widening of yield spreads is also likely for UK versus US 2-year securities according to Barclays, which estimates a 65% probability of such a move this month.
