World Markets Weekend Update: Rally Continues (Except For Japan)

by: Doug Short

The worldwide rally continued last week. Seven of the eight indexes on my watchlist posted big gains. But this week the Nikkei 225 replaced the Shanghai Composite as the lone loser, down 1.37% in its holiday-shortened week. Germany's DAXK was the top performer for the second consecutive week, up 3.31% and a whopping 7.96% over the past two weeks. France's CAC 40 finished second with a 2.70% gain and a two week gain of 7.15%. The S&P 500 took third place, and its 2.03% gain lifted the index to its all-time closing high.

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 36% from its interim high of August 2009. At the other end of the inset, Japan's stimulus-driven Nikkei closed the week 1.67% off its 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 strong performance of the Japan's Nikkei over the past few months puts it solidly in the top spot with a 31.73% YTD gain. While the Nikkei is the top performer, its three Asia-Pacific neighbors, India's SENSEX, Hong Kong's Hang Seng and China's Shanghai Composite, have performed the worst in 2013, although the weekly gains of the SENSEX and Hang Seng have given them fractional gains for the year, leaving the Shanghai as sole index in the red YTD.

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.