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Danish stocks plummet as Asia fears spread

UPDATED: The C20 Cap Index ended Monday down 4.7 percent, the biggest single-day fall since 2011, as global traders face "total panic" big drops on the Chinese market.

Published: 24 August 2015 09:43 CEST
Updated: 24 August 2015 20:02 CEST
Danish stocks plummet as Asia fears spread
A man walks past a board showing stock market prices inside a brokerage in New Taipei city, Taiwan, August 24, 2015. Taiwan stocks sank by more than 6 percent on Monday morning, following bruising los
The Danish blue chip index C20 ended Monday's trading down 4.7 percent following sharp falls in Asian markets that opened earlier on Monday.
 
The fall represents the largest single-day decrease on the index since it was established in 2011 just days after the previous single-day record fall was recorded. 
 
All 20 Danish blue chip companies ended Monday in the red, with Danske Bank and A.P. Møller-Mærsk stocks taking the biggest hit. Other major Danish companies including Carlsberg, Pandora, Vestas and Christian Hansen also saw major losses.
 
 
Several Chinese indices fell by around eight percent in early trading, while bourses in Hong Kong, Taiwan and Japan were also hit hard. The Tokyo-based Nikkei index fell by 3.21 percent in morning trading to below 19,000 points, its lowest point in the last five months.
 
“The market has been nervous the past few days and many are fearing a recession in China,” Mads Zink, Danske Bank's head trader, told Ritzau Finans.
 
TV2's financial commentator Ole Krohn said Monday's trading “appears to be total panic”. 
 
Other European markets took major falls on Monday, including London, where the FTSE plunged 2.8 percent at the start of trading. Germany's DAX stock market index lost 3.24 percent of its value to fall below 10,000 points for the first time since January. 
 
US markets also plummeted on Monday, with the Dow Jones industrial average down by more than 1,000 points to start the day. 
 
The financial unrest in Asia and Europe comes days after Wall Street suffered its biggest one-day loss in almost four years.
 
On Monday North Sea and US oil prices – a major marker of economic stability – dropped by just over a barrel to around 44 and 39 dollars respectively. The dollar also weakened against both the euro and the Japanese yen.
 
Market observers have been watching China anxiously for weeks as the country suffers an abrupt slowdown in economic growth.
 
The latest loss of value comes in spite of massive Chinese government efforts in recent weeks to shore up markets in the country.
 
Shanghai's stock market has now lost all of the value it had added in the course of 2015.
 
The C20 drop on Monday followed a 3.23 percent fall on Thursday and a 2.6 percent decrease on Friday. 

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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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