Global Economy Back From the Brink
A recovery takes shape in Europe, and growth picks up in China.

When Mario Draghi, president of the European Central Bank, said on July 26 that he was prepared to do "whatever it takes" to save the euro, he altered the course of the European crisis -- and that of global stock markets. The Euro Stoxx 50 index of European shares gained 15% from the day Draghi made his comment through November 7, more than offsetting what had been a 5% loss for the index in 2012. Overall, foreign stocks gained 10% in 2012, as measured by the MSCI EAFE index, trailing the U.S. market, as measured by Standard & Poor’s 500-stock index, by almost three percentage points.
The threat of catastrophe in Europe is receding. Draghi followed up on his words with action by creating a bond-buying program to act as a backstop against disaster. Greece might still leave the currency union, but its exit likely wouldn't spark the kind of crisis that once seemed possible. The International Monetary Fund forecasts that the economies of Europe will expand by an anemic 0.2% in 2013, better than was expected just months ago.
Meanwhile, Chinese growth, which is down sharply because of decreased demand from Europe, reduced government spending and tighter monetary policy, will soon bounce back. The world's second-largest economy could easily expand by more than 8% (after inflation) in 2013.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Combine those improvements with the likelihood that U.S. politicians will steer away from the fiscal cliff, and the world might not look so gloomy after all. The MSCI EAFE index could notch 6% to 9% gains in 2013; the MSCI Emerging Markets index could serve up returns of 10% to 15%.
The best opportunities abroad lie among companies that sell to consumers in developing nations. Companies that focus on wants rather than needs -- such as luxury retailers Burberry (symbol BURBY) and Richemont (symbol CFRUY), based in England and Switzerland respectively, and German automakers BMW, Audi and Daimler -- sell at favorable prices relative to earnings and can capitalize on growing wealth in emerging nations. The best opportunities among local emerging-markets stocks are companies that cater to domestic demand, such as Hang Lung Properties (symbol HNLGY), which develops Chinese shopping malls, and Jubilant FoodWorks, which owns the franchise rights to Dunkin' Donuts and Domino's Pizza in India.
Fund investors should consider Dodge & Cox International Stock (symbol DODFX) and Harbor International (HIINX) for developed-market shares. For developing-nation stocks, look to T. Rowe Price Emerging Markets Stock (PRMSX). All are members of the Kiplinger 25.
Any number of unforeseen events could derail this delicate improvement in global prospects. Yet one country could offer a pleasant surprise. "With Japanese stocks flat for almost 30 years, the perception has been that Japan is where shareholder money goes to die," says Rob Taylor, co-manager of Oakmark International. Today, he sees big improvements in how Japanese companies deploy cash via dividend hikes and share buybacks. The stocks are cheap, even given depressed corporate earnings. Martin Jansen, manager of ING International Value, says the stocks could rise 20% in 2013.
Kiplinger's Investing for Income will help you maximize your cash yield under any economic conditions. Subscribe now!
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.
-
Amazon Ends Free Shipping Benefit Sharing with Non-Household Members
Starting October 1, Prime members will no longer be able to share shipping perks with those outside their household.
-
Big Tech Names Rise Above Broad Weakness: Stock Market Today
Some familiar names enjoyed solid rallies on the resolution of outstanding questions, but macro uncertainty hangs over the broader market.
-
AI Start-ups Are Rolling in Cash
The Kiplinger Letter Investors are plowing record sums of money into artificial intelligence start-ups. Even as sales grow swiftly, losses are piling up for AI firms.
-
What is AI Worth to the Economy?
The Letter Spending on AI is already boosting GDP, but will the massive outlays being poured into the technology deliver faster economic growth in the long run?
-
Kiplinger Special Report: Business Costs for 2026
Economic Forecasts Fresh forecasts for 2026, to help you plan ahead and prepare a budget on a range of business costs, from Kiplinger's Letters team.
-
How to Adopt AI and Keep Employees Happy
The Kiplinger Letter As business adoption of AI picks up, employee morale could take a hit. But there are ways to avoid an AI backlash.
-
AI-Powered Smart Glasses Set to Make a Bigger Splash
The Kiplinger Letter Meta leads the way with its sleek, fashionable smart glasses, but Apple reportedly plans to join the fray by late 2026. Improved AI will lure more customers.
-
Breaking China's Stranglehold on Rare Earth Elements
The Letter China is using its near-monopoly on critical minerals to win trade concessions. Can the U.S. find alternate supplies?
-
What New Tariffs Mean for Car Shoppers
The Kiplinger Letter Car deals are growing scarcer. Meanwhile, tax credits for EVs are on the way out, but tax breaks for car loans are coming.
-
AI’s Rapid Rise Sparks New Cyber Threats
The Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.