Chart of the day, global equity market edition

By Felix Salmon
August 11, 2011
Michael McDonough.

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I love this global equity snapshot from Bloomberg’s Michael McDonough. For one thing, it clearly shows how European bourses are in much worse shape than those in the U.S. First look at the green dots in the little 52-week sparklines: the American and European highs weren’t all that far away from each other, chronologically speaking. And then look at the red dots: every exchange in Europe is hitting new 52-week lows, usually quite dramatically. By contrast, the U.S. indices all have their red dots over to the left: we still haven’t even dropped back to where we were a year ago.

A similar tale is told in the percentage-change columns. News headlines, of course, concentrate on what’s happened on a daily basis, with U.S. stocks down more than 4% and European stocks trading up on the day. But take a step back and the bigger picture is rather different: the sea of red, marking stock markets down more than 20% from their 52-week highs, is almost entirely European. And the biggest loser of all, the Italian market, is down a whopping 35%. If the Dow fell that much from its 52-week high, it’d be at 8,331, with the S&P at 887.

The lessons here, then, are firstly that if you spend your time looking at intraday stock-market movements on a country-by-country basis, it’s easy to miss what’s really going on. I’m in the UK right now, where there are lots of headlines about the plunging stock market, but no indication that it’s up there with Canada as the best-performing stock market in the world.

And secondly, the Eurozone is in serious trouble. Instead of looking at the amount that the markets have fallen from their highs, try looking at the degree to which they’ve recovered from their lows. The Euro Stoxx 50 hit a low of 1,809 on March 9, 2009; it’s rallied 18% since then. By contrast, the S&P 500 is up 101% from its March 2009 low: even after Wednesday afternoon’s swoon, it’s still at more than twice the level it closed at on March 5 of that year.

Does this mean that U.S. stocks simply have that much further to fall, before they catch up with their European counterparts? I suppose that’s one way of looking at it. But more realistically, the worst-case scenario for the U.S. is a double-dip recession; the worst-case scenario for the Eurozone, by contrast, is downright existential. Even on an up day today, the French banks are still seeing their shares marked down ever further. The very solvency of the Eurozone banking system in general, and the French banking system in particular, seems to be in doubt. U.S. banks don’t have that kind of European sovereign exposure, so we have a significant advantage on that front.

It might seem a bit like schadenfreude to take solace in the fact that other countries are much worse off than we are. But as the current stock-market volatility continues, it’s worth keeping such things in perspective. Europe is a global economic powerhouse; it can’t suffer these kind of woes without infecting the rest of the world somehow. And the U.S., in the grand scheme of things, seems — still — remarkably insulated from what’s going on across the Atlantic.


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Silly chart: data not taken at the same time point, not corrected for currency, price change taken from 52-wk high (idiotic) which introduces a volatility bias etc…for broad indices, us/eu difference is 2 or 3% ==> noise.

Posted by alea | Report as abusive

52 weeks back the euro was at approx 1.26, right ?

Posted by hansrudolf | Report as abusive

USD/EUR down 8% since August 2010. Hence no difference whatsoever.

Posted by Panley | Report as abusive

I’m sure the US will catch up — we’ve been embracing the austerity measures of the PIIGS+UK, of late.

Posted by GRRR | Report as abusive

52 weeks back EUR/USD was 1.322 seven day avg; this week the avg is 1.426, so ya I think it is reasonable to say the difference in moves is just noise. Plus the fact that Europe has had the tougher go of it this this week with the French banks… let’s see what that chart looked like for the 52 wks ending July 29 or August 5 even. It’s funny you would post so assuredly on this when your usually meme is don’t watch the daily moves – as far as I’m concerned the dates are cherry-picked and not meaningful unless constrasted against weekly trends, ie different 52 wk periods.

Posted by CDN_Rebel | Report as abusive

yeah, yeah we get it. European traders are stupid, American traders are brilliant. In Europe there is a monster crisis, in America no problems except a wash over from the European crisis. America is the stable fortress in the world.

Felix, this was week 1. It’s going to take a while…

Posted by FBreughel1 | Report as abusive

Yes… no doubt, this is just getting started. We have just resumed the bear market and every big institution on Wall Street knows it. The idea that QE3 will save us is ridiculous.

Unless, I mean, people think we have in fact finally wandered upon the panacea for which all bear markets in the future will now be cured. And those same people think it was so silly of us not to have thought of this before – the whole dot com crash could have been averted had we only known about the secret of printing money.

My prediction: By Christmas we will have re-tested 666, and in short order. With the machines running rampant and totally unchecked, it’s feasible we could be down that low within six weeks. Wait and see.

Posted by Chancee | Report as abusive

Wow, 666? A 5% dividend from KO, 6% from PG or JNJ?

I’m salivating… I thought we were in a market environment that promised *LOW* returns, not record-breaking dividend yields!

This isn’t 2001, or even 2008. Most of the big companies have real profits, and most of those profits are generated outside the US.

Posted by TFF | Report as abusive