FYI | Oct 02 2010
By Chris Shaw
There have been some tough Octobers for equities but Barclays Capital's analysis of monthly seasonal trends shows median returns for the month are largely positive. This is especially the case for the FTSE100, where October tends to be its best month of the year.
This year, along with the FTSE at 83% Barclays suggests the Hang Seng has a high likelihood of gaining for the month at 76%, while the All Ords, the Dow Jones, the S&P500 and South Africa's JSE All Share index are all given 60-70% chances of finishing October higher.
Those markets given a less than 50% chance of gaining in October are in Asia, Barclays giving India's Sensex and China's Shanghai Composite index 45% and 46% chances respectively of recording a rise for the month.
The US dollar has been weak of late and October should be no exception, Barclays noting the greenback has typically lost ground against the majority of currencies this month. In contrast the commodity currencies tend to perform well, as do “safe” currencies such as the Swiss franc.
The euro, British pound and Australian dollar are all given between 57-59% chances of gaining against the US dollar this month, while Barclays expects the euro should also do well against the British pound. US dollar/yen and euro/yen rates are both viewed by Barclays as having just slightly better than 50% chances of gaining this month.
October has typically been a good month for natural gas prices but Barclays ascribes only a 44% chance of a gain this time around, the same percentage it gives to any gain in the gold price. Oil in contrast is given a 71% chance of closing the month higher, while Barclays suggests both copper and aluminium have less than 50% chances of gaining this month.
Fixed income has typically delivered a more bullish performance in October and the forecasts of Barclays reflect this, as among 10-year securities only Euro and Swiss issues are given a better than 50% chance of posting an increase in yield for the month.
At the shorter end Barclays suggests the 3-month Euribor has a 72% chance of a yield increase this month, while UK 3-month securities are given a 57% chance of delivering a rise in yields.
With respect to yield curves Barclays notes steepening tendencies are strongest in Japanese 2-year v 10-year securities, while there is a low 21% likelihood of any widening in EU v US 2-year securities according to Barclays.
