Stockholm shares fall again
TT/The Local · 15 May 2006, 17:49
Published: 15 May 2006 17:49 GMT+02:00
"What we are seeing is a recoil after a fantastic period of increases," said analyst Peter Malmqvist at Nordnet to TT.
"A lot of this is about psychology - the falls are heavier when analysts and traders have expected the rises to stop. When they actually do, we start to look for negative trends that affect the market."
The most significant reason for the break in the positive trend now is the US Federal Reserve's decision last week to raise interest rates, and its hints that further rate rises are on the cards.
Malmqvist also says that Swedish listed companies are likely to find it difficult to continue to deliver as strong profits for the rest of the year as they have for the first quarter.
"In the past three years, the Stockholm exchange has gone up by 150 percent from its lowest point, and no tree grows to the sky," Malmqvist said.
During that period the stock market has had eight downturns, where share prices have fallen. Each time, prices have dropped between 6 and 10 percent.
"I don't see any reason for this downturn to be sharper than that. In that case it would mean that when this downturn levels out, the year's increase would stand at 2-3 percent."
Rodney Alfvén at Cheuvreux Nordic, said the downturn needed to be put into perspective.
"That's how life is - this is not a crash or a crisis by any means. It is a correction of a very strong rise," he said.
"We have not seen the end of this correction - we can expect further falls of between 3-7 percent before it's over."