World Markets Weekend Update: The Big Spread

by: Doug Short

The past week saw the biggest performance spread of the year among the eight world indexes on my watch list. India's SENSEX rose 4.24% in four days of trading (Friday being the Rama Navami holiday), a rally triggeredy by rate cuts expectaions. In sharp contrast Germany's DAXK fell 3.86%. The general skew for the week was negative, with only China's Shanghai Composite joining the SENSEX in positive territory. Aside from the slumping DAXK, two indexes fell more than one percent and two others fell more than two percent. The S&P 500 had the second worst performance weekly performance on the watchlist and its worst weekly close since the Friday following the November presidential election.

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 over 35% from its interim high of August 2009. At the other end of the inset, Japan's stimulus-driven Nikkei closed the week 1.72% off its interim high set on April 11th.

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 with over three times the gain of the second place S&P 500. While the Nikkei is the top performer, its three Asia-Pacific neighbors, Hong Kong's Hang Seng, China's Shanghai Composite and India's SENSEX, along with Germany's DAXK, have performed the worst in 2013, all with YTD losses. That's one more than last week's red-zone count (the DAXK being the newcomer).

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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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.