FYI | Sep 01 2010
By Chris Shaw
September is traditionally a bearish month for equities globally, Barclays Capital noting a strong negative skew on average and median returns in markets around the world. The worst is France's CAC 40 Index, which tends to post its most bearish month of the year in terms of average returns.
Exceptions to this are the Sensex Index in India and Australia's All Ords. Barclays Capital gives both markets a 60% chance or better of posting a gain for the month this time around. Most other markets are given a less than 50% chance of advancing this month, the Dow Jones and Nikkei indices among the worst with respective 36% and 40% chances of advancing according to Barclays.
A bearish September is also typically the case for the US dollar against the majors, Barclay noting performance for the greenback tends to be worst against the euro and the Swiss franc. This trend is expected to hold up this month as the group has ascribed a less than 50% chance of the US dollar gaining against most major crosses.
In contrast, the outlook is seen as brighter for the euro, Barclays seeing the euro/British pound and euro/US dollar pairs as the most likely to advance given odds for both of 67%. Australasian currency performance is expected to be mixed, Barclays giving the Aussie dollar a 56% chance of gaining on the greenback but applying only a 46% chance for the New Zealand dollar similarly ending the month higher against the US currency.
Among commodities, September tends to be a good month for natural gas prices, while gold also tends to deliver its best monthly performance of the year. This is reflected in the odds of advances, as Barclays gives both gold and silver 63% changes of ending the month higher and natural gas a 58% chance.
Elsewhere among the commodities, oil is given a 56% chance of gaining for the month, while the base metals are expected to do it tougher. Barclays gives aluminium just a 30% chance of ending the month higher, while copper is given a 46% chance of gaining.
For fixed interest, September has typically been a bullish month for all except the short end of the yield curve and Barclays sees this trend as continuing. The Swiss and Australian 10-year securities are given the lowest odds of a yield increase at 20% and 28% respectively, compared to odds for Euro and Japanese 10-year bonds of 33% and 36%.
US and UK 10-year securities have respective odds of advance of 46% and 48%, while at the shorter end Barclays sees 3-month Libor and 3-month Euribor securities as having 64% and 65% chances of yield gains this month.
In terms of yield curves and relative value, Barclays notes September is the best month of the year for UK 2-year versus 10-year bonds, with the odds of a widening in the spread this time around at 78%. In contrast, the odds for a further widening in the spread between Japanese 2-year and 10-year bonds is seen as just 33%.
