Flags of EU member states flying near a statue holding the euro sign in front of the European Parliament in Brussels.(Photo: George Gobet, AFP/Getty Images)
For stock investors, sending money abroad worked out pretty well,
despite fears of a eurozone collapse. Whether Europe can ride out its
debt crisis and rebound from its austerity programs in 2013 remains to
The MSCI Europe, Australasia and Far East index rose
13.7% in 2013, vs. 14.1% for the Standard & Poor's 500 stock index
with dividends reinvested.
Most European stocks rebounded smartly
from their 2011 lows during the height of the Greek debt crisis.
Germany's DAX index, for example, soared 29% in 2012, vs. a 10% tumble
Biggest gainers among the developed markets: Belgium, up 36.3%, and Denmark, up 30%, according to MSCI.
MSCI's reckoning, Japan was a dead weight on international returns. Its
broad-based Japan index rose just 6.21%. The large-cap Nikkei 225
index, however, soared to a 19% gain.
Spain, still struggling
with massive unemployment and soaring debt, saw its stock market fall
3.6%. Greece was close behind with a 3.5% decline, and Portugal fell
Emerging markets also fared well in 2012, rising 15.1%,
according to MSCI. China's stock market soared 18.7%. The standout:
Turkey, up 61.2%.
The big question: How long international stocks,
particularly in Europe, can maintain their rally. Austerity programs
designed to cut government spending will help the biggest debtors --
Italy, Greece, Portugal and Spain -- in the long run. In the short
term, however, massive layoffs mean massive unemployment, deflation,
and plunging economic growth in those countries.
The Eurozone --
the 17 countries that use the euro as a common currency -- will
probably muddle through in 2013, says Michael Hasenstab of Franklin
Templeton Investments. "Greece will probably remain in the eurozone.
"Panic surrounding issues in the rest of the eurozone, such as in
Spain, Italy and Ireland, also appears to us to be overstated."
bright note for 2013: China is embarking on yet another stimulus
program, which should help its major trading partners in Asia. Unlike
previous programs, however, China's 2013 push will be to boost its
domestic technology and consumer industries, rather than