FYI | Mar 02 2011
– Equities show positive trend in March
– Mixed month for the US dollar
– Good month for natural gas, oil
– Yield increases likely for long-term bonds
By Chris Shaw
Global equity markets are skewed to positive performance in March according to technical analysts at Barclays Capital, their seasonal trends analysis showing the Shanghai Composite Index typically delivers its best month of the year.
Barclays expects this trend should continue and ascribes the Shanghai Composite a 71% chance of ending the month higher, while major indices such as the Dow Jones, the NASDAQ Composite, London's FTSE and France's CAC40 are given 60-65% chances of gaining.
The Nikkei is just under such odds levels with a 59% chance of finishing March higher than it started, while Barclays gives the All Ords a 55% chance of gaining. Most likely to lose ground are India's Sensex and the Hang Seng, with respective chances of rising in March of 34% and 49%.
In foreign exchange markets the analysts at Barclays note March is the most bearish month of the year for the AUD/USD pair, with only a 42% chance given to the Aussie gaining on the greenback this month.
March tends to be mixed for the US dollar generally as Barclays sees a 55% chance the euro gains on the dollar but only a 45% chance the US dollar can end the month higher against the yen. The euro is seen as even less likely to gain against the Japanese currency, with just a 42% chance of rising in the view of Barclays.
March is typically the best month of the year for West Texas Intermediate (WTI) prices and Barclays ascribes a 68% chance of a gain this time around, but the best performing commodity should be natural gas.
The analysts at Barclays give natural gas an 83% chance of finishing March higher, noting the commodity tends to deliver large median and average returns in March. Other commodities likely to gain are copper at 64% and spot silver with a 53% chance, while Barclays gives spot gold just a 49% chance of gaining and aluminium a 48% chance.
In fixed interest, March tends to be the worst month of the year for a range of long-term bonds, with Gilts, Swiss, Canadian and Swedish 10-year bonds all tending to deliver yield increases. These trends should hold according to Barclays given odds of 50-68% of yield gains this month.
Yield gains in US securities are also likely given odds of 62% for 10-year bonds and 60% for 5-year bonds, while Aussie and New Zealand 10-year bonds both are given 50% odds for a yield advance this month. Least likely to see a yield increase according to Barclays are 3-month EuroYen securities, with odds of just 26%.
With respect to yield curves UK 2-year vs 10-year bonds tend to flatten the most as measured by median returns, while Barclays notes Japanese 2-year vs 10-year bonds also flatten more in March than any other month of the year. Most likely to see a widening in yield curve according to Barclays are EU vs US 2-year bonds at odds of 71%.
