FYI | Dec 03 2007
By Chris Shaw
Investors hoping for a Christmas rally can take heart as Barclays Capital’s monthly seasonal trends report for December shows apart from the Shanghai market global equity markets have a pronounced positive skew for the month.
On the group’s assessment the global bell-wether Dow Jones and S&P500 Indices both have a 70% or better chance of advancing for the month, while it estimates the Australian market has a 78% chance of closing the month higher than current levels.
What could help the Australian market is the group’s finding base metal prices have a tendency to perform well in December, with aluminium given a 75% chance of trading higher and copper a 52% chance. Precious metals also tend to do well this month, though the group estimates this year gold has only a 50:50 chance of advancing while silver has a less than even month chance.
Energy prices seem similarly poised as Barclays estimates both natural gas and WTI spot prices have a 50% chance of moving higher, while the broader CRB Commodities Index has a 47% chance of advancing in the group’s view.
Those exposed to currency markets would do well to focus on the euro as it tends to be the best performing currency in December, having rallied against both the US dollar and the British Pound in each of the past five years.
Barclays also expects to see strength in the euro against the yen, while it estimates there is a 58% chance the Aussie dollar will gain against the greenback and a 61% the Kiwi currency will strengthen against the US dollar.
The group notes December tends to be a bullish month for global fixed income, though this wasn’t the case in December of last year. It sees the Euroyen as having the best chance of a yield advance given this has occurred in each of the last four years, while the Euro, US dollar and the Australian dollar 10-year bonds all are estimated to have a less than 50% chance of seeing yields advance this month, while the New Zealand dollar 10-year bond is given a 50% chance of a yield gain.
