FYI | Apr 01 2010
By Chris Shaw
Australian equities have begun April on a higher note, a move in line with the observation of Barclays Capital that equities generally have a positive skew for the month. Best performers tend to be the Shanghai Composite and France's CAC40 Index, while Barclays suggests the All Ordinaries has the best odds of 80% of posting an advance this month.
This compares to a 73% chance of gains for the Shanghai Composite, the UK's FTSE and the CAC40, while the Dow Jones is given a 64% chance of advancing and the Nikkei a 68% chance. Least likely to gain is India's Sensex, with a 57% chance according to Barclays.
Expectations are more mixed for commodities as while natural gas typically does well in April, silver tends to weaken, reflected in their respective odds of an advance of 63% and 38%. Gold tends to do better than silver and Barclays gives it a 55% chance of gaining this April, while oil is ascribed a 54% chance of advancing and copper a 57% chance. Aluminium in contrast is given just a 36% chance of ending the month higher.
Commodity currencies tend to perform well in April, according to the research of Barclays and it suggests this trend will continue, with the New Zealand and Canadian dollars given better than 60% chances of gaining against the US dollar. In contrast the Australian dollar is seen as more of an even money bet to gain against the greenback this month.
The US dollar is more mixed against the other major currencies, being a few percentage points either side of even money with respect to the chances of gaining this month against the British pound, the euro and the Japanese yen according to Barclays. The euro is also expected to do little against the yen.
In fixed interest markets Barclays suggests the best odds of a yield increase come from Canadian 10-year bonds at 75%, while UK, Euro and US 10-year securities are all about a 60% chance. In contrast Australian 10-year securities are considered among the least likely to produce a yield advance this month at just 41%.
In terms of yield curves, Barclays suggests US 2-year versus 10-year securities are the most likely to generate a steepening yield curve this month, its expectation being they post their best average returns of the year. In relative value terms Barclays notes US 2-year securities tend to underperform against matching securities in Europe, the UK and Japan.
Turning to a quarterly view, Barclays notes in equity markets the June quarter is the seasonally best quarter of the year for Australia's All Ordinaries, while the Hang Seng also tends to deliver solid gains.
In contrast, the Dow Jones, Germany's DAX and the UK's FTSE indexes all experience their weakest quarters for the year.
The June quarter also tends to be a mixed one in commodity markets, Barclays pointing out four of seven assets it covers – silver, aluminium, copper and the CRB index, tend to deliver their worst performances of the year.
In contrast, natural gas is the clear winner, historically delivering the best returns and being given the highest odds for an advance this quarter at 63% against 51% for gold, 52% for copper and 40% for aluminium and silver. Barclays ascribes oil a 46% chance of gaining in the June quarter.
In currency markets Barclays notes the New Zealand dollar against the greenback posts the strongest median quarterly return and it sees it, along with the euro against the yen, of having a better than 50% change of gaining this quarter.
While the Aussie dollar tends to struggle against both the US and Kiwi dollars in the June quarter, Barclays expecting a similar outcome this time around given odds of an advance for each pair of 43% and 45% respectively.
Among fixed interest securities, the June quarter tends to be the worst one of the year for US 10-year bonds as yields tend to rise by around 14 basis points, while Barclays notes New Zealand 10-year bonds and US 2-year securities enjoy their best respective quarters with yields falling on average by 22 basis points and 2.35 basis points. Australian 10-year bonds are given just a 35% chance of a yield increase this quarter.
