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ECONOMY

Stockholm stock market in record fall

The Stockholm stock market fell 5.2 percent on Monday - the worst fall in nearly three years.

Published: 9 August 2011 07:52 CEST
Stockholm stock market in record fall

European stock markets fell across the board on Monday and the US Dow Jones closed down 5.5 percent.

Trading in Stockholm fell as expected on Monday in the wake of the credit rating agency Standard & Poor’s downgrading of America’s credit rating late on Friday.

The day was characterised by turbulence with the initial fall of around 2.5 percent on opening rebounding into positive territory for a while while the market struggled to digest the news from the US.

The fall in the OMXS index by 5.2 percent to 281.9 was one of the largets of the European exchanges.

Peter Karlsson, chief analyst at Handelsbanken, explained the drop in the fact that Stockholm has a higher proportion of companies that are sensitive to the economic cycle.

He mentioned Swedish export-oriented companies such as Sandvik, SKF, SSAB and ABB which are all sensitive to a declining world economy.

Sandvik fell 7.4 percent to 78.50 kronor ($12), SKF fell 6.0 percent to 138.40 kronor, SSAB’s A-shares fell 7.9 percent to 63.30 kronor and ABB was down by 6.2 percent to 131.5 kronor.

Several other manufacturing shares also noted large declines with truck maker Volvo’s B shares down 6.4 percent to 76.60 kronor.

Telecommunication services, consumer durables and banking sectors all performed slightly better than the overall market index. Telecom operators fell 3.8 percent, companies in the durable goods sector fell 3.5 percent and the banking sector was down 4.9 percent.

Clothing chain Hennes & Mauritz was one of the bigger companies that held up best in the stock market free fall. HM’s B shares fell 2.1 percent to 190.50 kronor.

Of the leading European stock markets, the decline was greatest in Frankfurt, which, like Stockholm has many export-oriented and cyclical companies. Frankfurt’s DAX index fell 5.0 percent to 5,923.3, the London Stock Exchange fell 3.4 percent to 5,069.0 and in Paris was down 4.7 percent to 3,125.2.

Political leaders across the globe worked to calm fears with Swedish finance minister Anders Borg assuring households by projecting that no austerity measures will be announced in the upcoming budget.

He meanwhile emphasised the Swedish government’s cautious approach to the crisis, lessons learned from the previous bout of turbulence in 2008.

US president Barack Obama held a speech later on Monday to try to calm the US markets but his words did little to stop traders reaching for the sell button and falls continued unabated throughout the afternoon.

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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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