The 2015 brought a big disappointment to the Warsaw Stock Exchange. Despite the good performance of the Polish economy, WIG felt by 10%, which ranks it among the indices of the countries where the economic situation was incomparably worse. This was primarily because the main components of the major stock indexes come from the sectors where the influence of the state economic policy is significant and investors decided that actual or potential decisions as unfavourable or at least risky for many companies.
Relatively good economic situation prevailed on Western stock exchanges. In the euro zone the long awaited recovery has come although during the year Euroland was shaken by the negative political events (negotiations with Greece, avalanche influx of immigrants, the intensification of terrorism) stock exchanges have brought solid profits. STOXX50 index rose by 5%. This probably helped the European Central Bank, which intensified the stimulus efforts.
The level of S&P500 index in the US remained unchanged. American companies bothered with strong dollar, weak foreign demand and slowly increasing wage pressure, which have not been able to compensate sales volumes. Energy sector was under pressure because of cheap oil. The year proved to be very difficult for most developing countries, it was reflected in the return rates of stock market indices. The year was very turbulent for the Chinese stock market, where 25% correction took place in August.
The Eurodollar amounted to 1.20 at the beginning of the 2015 and ended close to the level of 1.09. The extension of quantitative expansion in the euro area in January and the strong expectation for a rate hike in the US pushed EURUSD to about 1.05 in mid-March. FED withdrawal from tightening monetary policy in the first quarter and conditioning the potential rate hikes from the dollar, further improvement in the labour market and inflation resulted in no change in monetary policy of the US in the second and third quarter. With the weakening of expectations for a quick hikes in the US, the EUR/USD exchange rate to the end of August has reached around 1.17. However, the progressive slowdown in the Chinese economy and strong expectations for a rate hike in the US until the end of 2015, strengthened the dollar against the euro.
EUR/PLN started the year at the level of 4.28 and closed at the level of 4.26. Cessation of EUR/CHF defence at 1.20 by the SNB, temporarily weakened the EUR/PLN at the rate of 4.34, but the next few months brought the appreciation of Polish zloty thanks to the end of interest rate cuts in Poland at a relatively high level compared to previous expectations of the market and visibly softer FED rhetoric with respect to the prospects of rate hikes in 2015. As a result, in April the EUR/PLN reached 3.96 (annual minimum).
Concerns of Greece bankruptcy ant its exit from the euro zone resulted in a reversal of the ongoing trend since the beginning of the Polish zloty appreciation. Although in the beginning of July, Greece finally reached an agreement with creditors, thus avoiding the “GREXIT”, however a growing economic slowdown in China, combined with a collapse of the Shanghai stock exchange (which occurred in mid-August) gradually weakened the Polish zloty until the end of 2015.
Interest rates market
The 2015 brought very high volatility in the interest rate market. Yields on 2-year treasury bonds fell by 20 bps. To 1.55%, while in the 5-year rose by 9 bps. to 2.21% and 10-year old by 43bps. To 2.94%. Thus, the yield curve significantly dressed up, reaching for the spread of 2Y,10Y at the end of the year, level of 135bps.
Beyond the changing shape of the expansion curve, the asset swap spreads was observed, it was related to increased concerns about the situation in emerging markets, as well as the announcement of increase in the borrowing needs of Poland in the coming years. The valuation of short-term treasury bonds strengthened the decision of: the ECB to loose monetary policy in the euro area, prolonged period of deflation in Poland, the decline of global raw material prices and ongoing expectations for easing of monetary policy.
On the other hand, in the case of longer end of the curve a negative impact of the valuation was at the beginning of the normalization of monetary policy in the US, the Polish zloty depreciation, as well as increased concerns about the economies of emerging markets.