Europe's news in English

COPY LINK

BUSINESS

European stocks climb after Swedish election relief

Investors appeared more relieved about the dampening prospects of a 'Swexit' than concerned about political deadlock in Sweden.

Published: 10 September 2018 15:39 CEST

European stocks climb after Swedish election relief

File photo of the Stockholm stock index. Photo: Stina Stjernkvist/TT

European equities rose on Monday as the far-right failed to make as large gains as expected in Swedish elections.

Stockholm's benchmark OMX 30 index of major companies added 0.4 percent in value, while the Swedish krona steadied.

There were also similar gains for Frankfurt and Paris indices after the Swedish vote, which once again exposed simmering tensions over immigration in the European Union.

London stocks rose as official data revealed that the UK economy bounced back with 0.3-percent growth in July from the previous month, despite Brexit concerns.

'Swexit risk is low'

As expected, neither the centre-left nor the centre-right bloc obtained a majority in Sweden's legislative vote.

While minority governments are nothing new in Sweden, it has left the nation's Social Democratic Prime Minister Stefan Löfven with the prospect of lengthy talks to form a new coalition administration.

The far-right Sweden Democrats meanwhile solidified their position as third-biggest party, albeit with a lower score than they had expected.

The vote has dented the prospect of a so-called 'Swexit', or Swedish exit from the European Union, following Britain's shock 2016 Brexit referendum to leave the bloc.

“The risk of 'Swexit' is low,” said Robert Bergqvist, chief economist at banking group SEB.

He added: “Sweden risks becoming a battering ram in an increasingly polarized international debate, and the ability of Swedish political leaders to manage the new challenges is likely to influence what path other countries will choose.”

“The Swexit issue is also beginning to draw increasing international attention, especially in the UK, where people see parallels to Brexit.”

READ ALSO: The Local's coverage of the Swedish election

Member comments

Log in here to leave a comment.

Become a Member to leave a comment.

How to protect your Swedish savings when the stock market tumbles

Stock market volatility can be unsettling, especially when it hits close to home.

On Monday, the Stockholm stock exchange mirrored global market turmoil, with the OMXS index dropping 4.8 percent in morning trading. By 11 am, there was a slight recovery, but the index remained 2.6 percent down.

READ MORE: Stockholm stock exchange opens in the red amid global market jitters

Big names in Swedish industry weren’t spared: Boliden, a major mining company, dropped 3 percent, defence giant Saab fell 1.5 percent, and engineering firm Sandvik declined by 2.6 percent. In the banking sector, SEB took a 2.4 percent hit, while Swedbank dropped 3.6 percent.

This turbulence in the Swedish market came after significant drops in Japan’s Nikkei 225 index, which experienced its most significant one-day fall since the 1987 Black Monday Crash, and similar declines in markets across South Korea, Frankfurt, London, and anticipated losses on Wall Street.

In these uncertain times, many Swedish consumers with money invested in the market wonder whether they should do something to safeguard their savings.

Avoid impulsive decisions, expert warns

Stock market volatility can raise concerns about the safety of your savings, but according to SEB household economist Américo Fernández, there’s no need to panic.

“Should they be worried? I mean, no. I would say that this is how the stock market works: there’s a lot of uncertainty and risk connected,” he told The Local.

“When you have savings on the global stock exchanges, this will happen, especially when we’ve had at least six months of really, really good returns – maybe even too good. Then, this is a little bit expected.

“But of course, it’s always dramatic when we have such developments in the stock market in just one or two days.”

Slow and steady wins the (investment) race

For those wondering how to protect themselves against such crashes, Fernández emphasised a consistent and steady approach to investing.

“The most common thing, the best strategy for the broad masses, is to save on a monthly basis. And this is what many Swedes do; our surveys show that 9 out of 10 Swedes save on the stock market every month. This is precisely what you should do: invest in a mutual fund, which is quite common in Sweden,” he said.

“In circumstances such as these, you buy more at a lower price, instead of timing the stock market, which is almost impossible, continue your monthly investments through mutual funds. That’s a good way of diversifying your portfolio.”

READ ALSO: Will the krona’s decline stop Riksbank from cutting rates?

Ignore the alarmist headlines

The SEB household economist also advised against reacting hastily to alarming headlines.

“Another thing that households should be aware of is that when you see alarming headlines, you should sit and calmly ride the wave out.

“It’s understandable that a lot of people are affected by herd mentality when we have these negative headlines. Everyone, but especially households with tiny savings, acts and sells, and then they buy again when the headlines are positive, when the stock exchange is at high levels…

“That is the opposite of what you should do. Try to neglect these things and be cool in these circumstances, even though it seems bad and hurts your wallet. However, if it hurts your wallet too much, that might be a signal that you have too much money in the stock market (laughs), which can be common for younger investors. Although they have had it pretty good recently,” he noted.

This advice is not only applicable to Sweden but also relevant across Scandinavia, according to Fernández.

“I think it’s applicable. Across Scandinavia, all Nordic countries save a lot of money on the stock exchange, partially because the pension system isn’t fully funded by the government,” he said.

SHOW COMMENTS

Url copied to clipboard!