FYI | Feb 01 2007
By Rudi Filapek-Vandyck
January has been quite intense with global carnage in commodity markets and currency re-adjustments because the US dollar did not simply want to lie down and cop some kicking. We had a much weaker yen instead. Bond markets in Australian and the US had to price out interest rate expectations (both reversing to neutral-ish) but most equity markets did well.
After all this excitement one would expect February to turn out a much quieter month. Quant analysis by Barclays Capital into historical trends for the month suggests this is probably correct, corporate results releases notwithstanding.
Historial seasonal patterns, Barclays reports, appear to be pointing at US fixed income as the standout performer for the month with US 2-year Treasuries, 5-year Treasuries, and 10-year government bonds all exhibiting a tendency for higher yields throughout the month.
Commodity markets enjoy a generally positive skew, says Barclays, with the notion that WTI crude oil seems to be a laggard with the lowest odds for both an advance or a negative return for the month. (Barclays advises it has a negative bias though). Gold and silver are more likely to gain, while copper’s outlook is more for a price stabilisation. Aluminium performs traditionally the best in February.
Forex markets should see a stronger yen kicking in against both the euro and the US dollar and -surprise, surprise- global share markets should post some more positive returns, in the Far East in particular. Unfortunately, for investors in the Australian share market, the Australian All Ordinaries index seems to be the exception for the month with history showing it tends to lag the rest of the globe.
All this, obviously, is dependent on the question: will history repeat itself this year?