World Markets Weekend Review: The Big 2013 Rally Takes A Breather

by: Doug Short

As of Friday's close, six of the eight world indexes in my weekend update posted weekly losses, with France's CAC 40 as the biggest loser, down 3.29%. Germany's DAXK and Hong Kong's Hang Seng were down more than two percent, and the UK's FTSE 1000 and India's SENSEX lost more than a percent. The two indexes with weekly gains were up only fractionally. China's Shanghai, which has been the top performer for three of the past four weeks, was this week's winner with a 0.55% gain (a far cry from the previous week's 5.57%). The US's S&P 500 was second best with a 0.31% gain, but that was enough to put the index at an interim high only 3% below its all-time high set in October 2007.

The Shanghai remains the only index on the watch list in bear territory -- the traditional designation for a 20% decline from an interim high. See the table inset (lower right) in the chart below. The index is still down 29.93% from its interim high of August 2009. At the other end of the inset, the S&P 500, as I mentioned above, once again set a new interim high.

Here is a table highlighting the 2013 year-to-date gains, sorted in that order, along with the 2013 interim highs for the eight indexes. The 2013 rally has subsided with just one of eight at its YTD high, down from four last weekend and six the weekend before.

A Closer Look at the Last Four Weeks

The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. I've also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.

The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.

A Longer Look Back

Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Mumbai SENSEX, Hang Seng) is readily apparent, especially the SENSEX, but the trend over the past two years has not been their friend (make that three years for the Shanghai).

Check back next week for a new update.

Note from dshort: I track Germany's DAXK a price-only index, instead of the more familiar DAX index (which includes dividends), for consistency with the other indexes, which do not include dividends.