World Markets Update: Big News From The U.S., Japan, China

by: Doug Short

The holiday-shortened week for the Western indexes on my watchlist saw the S&P 500 hit a new all-time high against a backdrop of eurozone anxieties. Another big story was Japan's Nikkei 255, which closed the quarter with a gain of 19.27%, almost double the 10.03% gain of the closest contender, the S&P 500. The third big story of the week was the Shanghai Composite's loss of nearly 4% (3.94% to be precise). On the whole, the watchlist finished in the red for the third consecutive week. But the -0.44% average of the eight was not as grim as last week's -1.29%.

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 down a dismal 35.58% from its interim high of August 2009. At the other end of the inset, the S&P 500 closed the pre-Easter week on Thursday at its all-time high.

Here is a table highlighting the 2013 year-to-date gains (or, if you prefer, the first quarter results), 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, nearly double the gain of the second place S&P 500. With the Nikkei as the top gainer, its three Asia-Pacific neighbors, Hong Kong's Hang Seng and India's SENSEX and the China's Shanghai Composite, have performed the worst in 2013, all with YTD losses.

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 constency with the other indexes, which do not include dividends.