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ECONOMY

Stockholm stock market in shaky opening

As expected the Stockholm stock exchange opened sharply down on Monday although after an hour's trading had rebounded into positive territory.

Stockholm stock market in shaky opening

When trading opened on Monday morning the OMXS index plunged 2-4 percent as investors struggled to get a grasp on the weekend’s developments in global finance.

The widely tipped crash did not materialise in reality however and Stockholm largely stayed in line with the developments on the European and Asian markets.

The major banks had a rough ride initially with SEB down 4.6 percent, Swedbank down 3.5 percent and Handelsbanken also down.

Truck maker Scania and mining firm Boliden also fell initially, while the former recovered ground fairly quickly.

On Monday morning the minister for finance, Anders Borg, told Sveriges Television (SVT) that it is difficult to predict how Sweden will be affected by the turbulent world economy.

“In many ways, Sweden has a better starting point. We have a stronger currency and our banks are less vulnerable than in many other countries. But we are a small economy and a messy market can reflect upon our situation here as well,” Borg told SVT.

SEB chief economist Robert Bergqvist meanwhile expressed hope that the announcement by the European Central Bank on Sunday that they will purchase eurozone bonds and the G7 finance ministers pledge to cooperate will help to achieve stability.

“But there are still a number of underlying problems, and I think that we are going to have tough stock market conditions for the remainder of the week and the autumn,” he said.

Bergqvist concluded that there is no miracle cure to prescribe to ease the crisis, and there is very little political-economic scope for politicians to act with interest rates near zero and state budgets already stretched.

“As the indications are at the moment I am concerned that we are on our way into a new global recession. And what is worrying me is that there are no tools to use in order to boost growth again,” he said.

Cecilia Hermansson at SEB also questioned whether the steps taken at the weekend to encourage stability following the unprecedented lowering of the US credit rating were sufficient.

“There is a lot of insecurity and concern which is dictating the stock markets at the moment. But it was good news that decision-makers showed that they are ready to try to create stability,” she said.

Asian markets fell across the board on Monday with the Tokyo Nikkei 225 index down 2.2 percent, Seoul’s Kospi index down 3.8 and Hong Kong’s Hang Seng down 4.0 percent.

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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.

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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