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Swedish shares rise after global market plunge

Stockholm's stock exchange bounced back on Tuesday following a slump after crashing financial markets in China and elsewhere in Asia sent ripples around the world.

Published: 25 August 2015 11:55 CEST
Swedish shares rise after global market plunge
File picture of the Stockholm Stock Exchange. Photo: Fredrik Persson/TT

Stockholm's stock exchange rose by 3.1 percent after an hour of trading on Tuesday, clawing back ground after it took a tumble amid global turmoil sparked by Chinese markets suffering their biggest slumps since February 2007, before the last global financial crisis.

It followed the general trend in Europe, which saw the UK's FTSE as well as Germany's Dax and the French CAC 40 recuperating by 1.7 percent in early trading while shares in Italy rose 2.0 percent.

On the other side of the Atlantic, Wall Street was also expected to bounce back at the opening of trading later in the day, after suffering its biggest one-day loss in four years on Monday.

However, the Shanghai composite continued to fall on Tuesday, closing down 7.6 percent, following a period of unstable markets since a shock currency devaluation in China almost a fortnight ago. Tokyo's Nikkei index closed down 4.0 percent.

And Johan Javeus, chief strategist at one of Sweden's largest banks, SEB, told the TT news agency that it was too early to talk about a stable upwards trend for the European markets.

“It's normal after several days with large declines on a market that sooner or later you get a rebound. But that does not indicate that the market has hit rock bottom and is turning around,” he warned.

All eyes remain on the Chinese stock exchange, which has fallen more than 40 percent since June, in fear the turmoil will spark a new financial crisis in Europe. But Javeus advised Swedes to keep calm in the near future.

“It probably takes a lot more than that [to cause a crash], but what is happening is alarming,” he said.

But leading economists in Sweden warned those with cash invested in stocks and shares not to become unduly concerned.

“We have an extremely good period behind us,” said Maria Landeborn on Monday, savings expert for Skandia bank, referring to the past four years of stability in the global markets.

She told TT that while Swedes could see their investments decline in the immediate future, those hoping for a return in the longer term should not need to take any immediate action.

However she added that people with investments tied up in stocks and shares who were hoping to use the money within the next couple of years, for example to buy a new home or a car, should always consider keeping some of their cash in a more secure savings account.

“It's important that you have thought about the risks, and not been greedy and put everything into shares,” she said.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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