World Markets Weekend Update: The Rally Continues (Except For Germany)

The rally continued for the second week for most of the indexes on my world watchlist after five weeks of predominant losses. The Nikkei continued its massive rebound, chalking up a whopping 4.63% gain on top of 3.38% and 4.28% for the two previous weeks. The UK's FTSE 100 was a distant second, up an impressive 2.57%. The S&P 500 and Shanghai Composite straddled 1.5 percent by nine basis points, with the US index on the high side. The SENSEX, CAC 40 and Hang Seng posted fractional gains. The sole loser was Germany's DAXK with a 1.93% loss.

The Nikkei story in 2013 is absolutely astonishing. It hit its year-to-date closing high on May 22, up a mind-boggling 50.33%. It then fell 20.36% to its closing low on June 13th, sixteen sessions later. This Friday's close, sixteen sessions after the June trough, was a rise of 14.98%, giving the index a 37.66% YTD gain.

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 mind-numbing 42.18% from its interim high of August 2009. The S&P 500 remains closest to its interim high (which is also its all-time high) with a gap of 2.23%. The DAXK was in second last week, but after its bad week, it has been replaced by the FTSE 100 and dropped a few notches to fifth place.

Here is a closer look at the YTD performance, which, more than anything, illustrates the power of Abenomics to levitate the Land of the Rising Sun to its interim high on May 22, followed by a sudden and dramatic selloff and partial (59%) recovery with dizzying volatility.

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, despite its big correction, puts it solidly in the top spot with a 37.66% YTD gain, but well off its 2013 peak gain of 50.33%. There are three indexes in the red YTD -- the two from China and Germany's DAXK, which traded places with India's SENSEX, now fractionally out of the red.


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) up to their 2007 peaks is evident, and the SENSEX remains by far the top performer. The Shanghai, in contrast, formed a perfect Eiffel Tower from late 2006 to late 2009.

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.