FYI | Sep 01 2011
– September bearish for equities, US dollar
– Precious metals have good odds of price advances
– Fixed income markets tend to be bullish
By Chris Shaw
Historical trends indicate September has a strong negative skew for equity markets, though the technical analysts at Barclays Capital note there are some exceptions such as the NASDAQ, Australia's All Ords, South Africa's JSE and India's Sensex.
Among these the Sensex has the highest odds of an advance this month at 63%, while the All Ords is next best according to Barclays at a 59% chance of gaining and the NASDAQ at 53%.
Most other markets are tipped to decline, with the HangSeng and Nikkei given chances of advancing of just 46% and 44% respectively. Barclays sees the Dow Jones as having only a 35% chance of ending the month higher.
September also tends to be a bearish month for the US dollar against the majors and Baclays sees this trend as continuing this time around. The group estimates the euro has a 66% chance of gaining on the greenback, while giving the dollar just a 29% chance of gaining on the Swiss franc and a 42% change of posting gains relative to the Japanese yen.
The euro should also do well against both the British pound and the yen in the view of Barclays, the group giving better than 60% changes of gains this month in both cases. The outlook for other currencies is more mixed, Barclays giving the Aussie dollar a 55% change of gains against its US counterpart but ascribing only a 45% chance of the New Zealand dollar strengthening against the greenback.
In the commodity markets Barclays notes natural gas tends to be the best performer in September, while aluminium is the worst. This time around Barclays suggests the precious metals are most likely to gain, gold having a 62% chance and silver a 63% chance of ending September higher.
Nat gas is given a 56% chance of posting a gain and West Texas Intermediate (WTI) a 54% chance, well above aluminium at just 32% and higher than copper at 48%.
Fixed income markets tend to deliver bullish performance in September at the long end of the curve but Barclays notes the short-end tends to buck the trend. Barclays doesn't given any 10-year securities an even money or better change of seeing yield gains this time around but the story at the short-end is somewhat different.
Three month Libor and Euribor securities tend to deliver their worst monthly performance in September and this is reflected in 67% and 68% chances of yield gains respectively. Yields are also tipped to rise on three-month Euroyen securities.
In terms of yield curves, the odds of a steepening are highest at 78% for UK 2-year versus 10-year securities, while similar US, EU and Japanese yield curves are given only around 40% chances of steepening by Barclays.
On relative value grounds Barclays sees Japanese versus US 2-year bonds as offering the lowest likelihood of a widening in spread at just 32%, rising to a 50% chance of a widening for UK versus US 2-year bonds.
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