FYI | Oct 04 2011
– October median equity market returns positive
– US dollar tends to lose ground this month
– Modestly bearish month for commodity prices
– Bullish month for fixed income market
By Chris Shaw
While October has seen some big equity markets falls over the years, median returns are -contrary to general perceptions- largely positive, the UK's FTSE100 actually enjoying its best month of the year according to analysis by Barclays Capital. This October Barclays gives the FTSE an 83% chance of posting a gain.
The Hang Seng also tends to enjoy positive returns and Barclays gives this index a 76% chance of ending the month higher, followed by South Africa's JSE All Share index at 69% and Australia's All Ords at 68%. Only India's Sensex and the Shanghai Composite are ascribed less than 50% chances of ending the month higher.
In currency markets Barclays notes the US dollar tends to lose ground in October, while commodity currencies generally perform solidly. This time around the trend is expected to continue, Barclays suggesting between 55-60% chances of the euro, the British pound and the Australian dollar gaining on the greenback.
The chance the New Zealand dollar rises against the US dollar is even better according to Barclays at 68%, while the yen is expected to broadly tread water against both the US dollar and the euro. Barclays also notes Asian currencies such as the Korean won and the Singapore dollar tend to strengthen in October.
Among commodities, natural gas tends to be the star performer in October, Barclays pointing out this is amid a modestly bearish month for other commodity prices. October is typically the worst month of the year for copper and Barclays gives the metal only a 41% chance of gaining this time around, against 71% for natural gas, 44% for gold and 48% for aluminium. West Texas Intermediate spot is given just a 40% chance of an advance.
In the fixed income market October tends to be a bullish month, with the majority of 10-year securities having a less than 50% chance of a yield advance according to Barclays. At the shorter end of the curve the story is a little different, with Barclays estimating 3-month Euribor securities have a 72% chance of a yield increase and 3-month Sterling offers a 57% chance. In contrast, Barclays estimates 3-month EuroYen securities offer just a 28% chance of a yield increase this month.
In yield curve terms, a steepening tendency is strongest for Japanese 2v10-year securities, while curve tendencies are mixed elsewhere in the world. Barclays suggests Japanese v Euro 2-year bonds have the highest probability of a widening at 79%, while Euro v US 2-year bonds are estimated to have the lowest likelihood of a widening at just 21%.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
