World Markets Weekend Update: In The Dumps, Except For Japan

 |  Includes: FXY
by: Doug Short

Seven down, one up ... big. That, in a nutshell, is the story from the eight world indexes on my weekly watch list. Japan's Nikkei 225 surged 3.51% last week. The runner-up Shanghai Composite, which was closed Thursday and Friday, lost 0.51%. And it's all downhill from there, with the UK's FTSE 100 and Hong Kong's Hang Seng duking it out for last, both down fractionally more than 2.5%. The average weekly performance of the eight indexes was a loss of 1.09%. But if we omit the Nikkei, the average drops to -1.75%. Japan's aggressive monetary policy has had an amazing effect on the Nikkei and the Yen. The Nikkei's 3.51% gain was matched by the 3.73% plunge in FXY (CurrencyShares Japanese Yen Trust), which has been doing a long cliff-dive since October, with the past week as the biggest decline.

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 35.90% from its interim high of August 2009. At the other end of the inset, the Nikkei 225 closed the week at a new interim high.

Above 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, over 2 1/2 times 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.

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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.

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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).

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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.