Europe News 2015
In 2015 European stocks took a major hit due to the debt issues in Greece that sees no end in the near future. In spite of clear indicator of improving economy in the Eurozone, investors keep worrying about Greece's default on the country's sovereign debt and exit from the Euro and Eurozone itself. These news caused European stocks to plunge, at times into double digit percentage losses, including several times in the third quarter of the year. Critical talks between Greece and its lenders continued, but the outcome of talks remains uncertain. To make things worse, the MSCI Europe Index lost 4% year-on-end.
The Greek crisis was at its peak in June. The deadline approached to pay back a €1.5 billion to the International Monetary Fund. Greek government failed to pay up and proposed a change to the bailout package. In the near term it would restructure the country's debt and extend payments. This action meant technical default on obligations that caused strong bearishness in the European stocks exchange rates. Greek leaders have called for a referendum that would allow citizens to decide should they keep the austerity measures proposed by the creditors. Profit on Greek debt sky-rocketed to 30%, reflecting the level of uncertainty, but also a possibility for outstanding gains for risky investment strategies.
In 2015 stocks and bonds in all major European markets also lost their footing. German stocks went down 9% on average as economic growth slowed pace and the nation’s business confidence index fell for several months in a row. Spain's stocks declined about 6%. Considering the GDP growth nearing 2.7% in the first quarter, which is one of the fastest GDP growth rates in the Eurozone, the impact was not as heavy as some predicted.
Europe News 2015: Health care stocks
Health care European stocks in 2015 were among the biggest losers in this region, with a 5% depreciation on aggregate. Shares of GlaxoSmithKline went down the most, a 13% hit. The pharmaceutical giant has been facing increasing competitive threats from other companies. Moreover, GlaxoSmithKline stopped a planned dividend payment to its investors after disastrous first-quarter earnings. AstraZeneca's shares were also crippled by almost 13%, largely on investor concerns about cheaper alternatives to its best-selling drugs.
Europe News 2015: Industrial and IT stocks
Industrial and IT stocks lost about 6% in general. Shares of the troubled Siemens declined, and as a result the company announced new layoffs and a decline in earnings. Ericsson shares went down as well after a big decline in profit because of fewer orders from its primary clients, AT&T and Verizon. In the energy sector, Royal Dutch Shell went down 10% due to the ever-decreasing prices of oil. The oil giant suffered a 56% drop in its first-quarter earnings.
In bond European markets, the ongoing possibility of Grexit and uncertainty about the U.S. interest rates had a negative impact on the European bond market. At the beginning of year, Eurozone bonds rallied on information about the European Central Bank’s new quantitative easing program. However, sentiment shifted into a strong bearish trend in mid-April. German bonds were swinging wildly, hitting a record low of 0.05% on April 15 and quickly recovering above a 1% mark just two months later, which was a great possibility for speculative earnings. Finally, the yield on Germany’s benchmark 10-year note ended the year at 0.77%.