World Markets Update: Playing the Expectations Game

by: Doug Short

Here's a weekend snapshot of major world indexes. The table at right shows the performance over the past week.

All the indexes closed the week higher, with the Hang Seng setting a new interim high. The biggest winner, however, was the Shanghai Composite, up 3.13% since its last market day on September 30th (owing to the week-long National Day holiday from October 1-7). Even the laggard in the pack, the FTSE 100, closed the week up 1.16%.

The performance would be more impressive if it were based on market fundamentals rather than expectations of currency intervention and quantitative easing.

The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500 hit a low 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 4.4 months earlier on October 27, 2008. However, by aligning on the same day, we get a better sense of the present-day synchronous behavior of the markets than if we align the lows.

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A Longer Look Back

Here's a similar chart starting from the turn of 21st century — this time with the addition of the Bombay SENSEX, which has been a dramatic outperformer (although it closed Friday down 0.95% from last week's close).

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