World Markets Weekend Review: A Rally On Steroids (Except For China)

by: Doug Short

Seven of the eight indexes on my world watch list rallied big time last week. The average of weekly closes was an astonishing advance of 2.54%. Of the ten Fridays thus far in 2013, the latest performance was second only to the 2.75% logged on the first Friday of the year. The S&P 500's 2.17% gain was only good enough for a fifth place finish. Japan's Nikkei 225 took the honors with a mind-bending 5.84% surge. India's SENSEX was a "distant" second at a whopping 4.04%. France and Germany took the third and fourth spots with similar gains of 3.79% and 3.61%, respectively. China's Shanghai Composite came in dead last, the only index on the list with a negative performance, and a big one at that, down 1.73%.

The Shanghai is 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 down 33.21% from its interim high of August 2009. At the other end of the inset, three indexes at their interim highs: The Nikkei, FTSE 100 and S&P 500.

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 sustained advance of the Japan's Nikkei puts it solidly in the top spot. Five of the eight closed the week at their 2013 highs.

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.