World Markets Update: The QE2 Effect Takes a Breather


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

The manic increases of the previous week gave way to selling in five of the six indexes. Only the Nikkei, which is still deep in correction territory, closed the week for a gain. The Shanghai and Hang Seng were the big losers, especially the former, down 4.60%. The middle-of-the-pack S&P 500, up 3.60% the previous week, gave back 2.17%.

On balance the markets have made significant gains following the early rumours of QE2. But after the details were announced on November 4th, some of the gains have evaporated. At first blush this looks a bit like a “buy the rumour sell the news” scenario. But the post-announcement period has been too short to warrant any conclusions.

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 behaviour of the markets than if we align the lows.


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. This index had closed the prior week up 4.86% for a new all-time high, but during the past week it gave back most of those gains with a loss of 4.04%.



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