FYI | Jun 02 2011
– June is usually bearish for commodities except copper
– Equity performance mixed, worst month of year for All Ords
– US dollar generally weaker for the month
– US fixed interest tends to outperform
By Chris Shaw
According to Barclays Capital, the dominant seasonal trend in June is bearish commodity price performance. The exception is copper, which typically posts strong gains of an average of 2.35% for the month. Copper is given a 61% chance of closing this month higher.
Both natural gas and silver typically suffer their worst month of the year as measured by median and mean returns, Barclays giving natural gas a 44% chance of posting a gain this month and silver just a 33% chance. Gold has a slightly better chance of ending the month higher at 44% (still below 50%).
Historical data show June tends to deliver mixed results for equity markets, with Australia's All Ords delivering its worst month of the year and India's Sensex favoured to deliver gains. This time around, Barclays gives the All Ords just a 38% chance of gaining, equal to the JSE in South Africa.
In contrast, Barclays gives the Sensex a 70% chance of ending June higher, with the Nikkei the next best chance at 62%. The Dow Jones may do little given a 49% chance of gaining, while the FTSE100 in the UK has a 44% chance of gains and the Hang Seng a 56% chance, according to Barclays.
In the forex market, Barclays notes the EUR/GBP is the most consistent performer, delivering relatively high median and mean returns. This pair is given a 66% chance of posting a gain this June, while the USD/SGD is ascribed a 61% chance.
The US dollar generally weakens in June and Barclays gives 55% chances for the euro, the British pound and the Australian dollar to gain against the greenback this time around. In contrast, the New Zealand dollar is given just a 47% chance of ending June higher against the US dollar.
The yen tends to be mixed, Barclays suggesting while the euro has a 58% chance of gaining against the Japanese currency, the US dollar has a slightly less than even money chance of finishing the month higher.
Among fixed interest securities, Barclays notes the US curve has previously delivered outperformance in June, while other fixed interest markets in Europe in particular tend to suffer. Likelihood of yield advance estimates reflect this, Barclays giving US 10-year bonds a 45% chance, against 55% chances for both European and British 10-year bonds. Australian and New Zealand 10-year bonds are both given a less than 50% chance of yield increases this month.
At the shorter end of the curve Barclays gives US 5-year bonds a 47% chance of a yield gain this June, while US 2-year bonds are given just a 38% chance. Three-month securities in Europe and the UK are both given better than 50% chances of yield gains.
With respect to yield curves, Barclays notes in June the Japanese curve tends to see more steepening than any other curve. In contrast, US 2v10-year securities tend to experience a flattening of the yield curve.
A widening in yield spreads is most likely for Japanese v EU 2-year bonds, while Barclays suggests the likelihood of a widening in lowest for EU v US 2-year bonds.
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