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Optimism following US Senate bailout vote

Analysts in Sweden welcomed passage by the US Senate on Wednesday of a plan to help ailing US financial institutions, but cautioned that the financial crisis is far from being resolved.

Optimism following US Senate bailout vote

“We’ve taken an important step forward, but it’s not over yet,” said Robert Bergqvist, head economist at SEB bank, to the TT news agency following the vote.

“We’ll have to wait for the House of Representatives, but it’s hard to believe that they would say no to this.”

The House’s rejection of a previous bailout package left a lingering uncertainty with economic analysts around the world.

The Senate was seen as a smaller hurdle for the projected $700 billion rescue package, and the body had been expected to pass the bill.

“Uncertainty remains,” said Bergqvist, who pointed to a weak start to trading on Asian stock exchanges following the Senate’s vote.

But Bergqvist added that people should not underestimate the importance of the Senate giving its approval to the bill, as a no vote would have only deepened concern about the future of financial markets around the world.

“This was a necessary step. We have to solve the problems in the US, and it’s only the American’s themselves who can solve it, so this piece of the puzzle has to be in place,” he said.

Torbjörn Isaksson, head analyst with the Nordea bank told TT that it’s now time for the other house of Congress to act.

“[Senate approval] was generally expected, so to speak, and now there’s more pressure on the House of Representatives,” said Isaksson, who also provided his own analysis of why stocks had opened lower in Asia.

“It shows that [passage] was expected for the most part. It also shows that concerns about the economy are even stronger, especially when considering the drop in purchasing indexes we saw around the world [on Wednesday],” he said.

Isaksson doesn’t except a strong reaction to the Senate vote in Sweden, as the negative economic numbers had been released before the stock exchange closed on Wednesday, and the vote is only one of two steps needed to get the bailout bill through Congress.

“The big test will be the vote in the House of Representatives,” he said.

Bergqvist also cautioned against being too optimistic about the speed with which the US plan may become reality, emphasizing that the political process takes time.

Even if the US bailout becomes a reality, he said, global economic conditions won’t change overnight.

There are other issues at play which can’t necessarily be solved by interest rate adjustments or injections of public money.

“There’s a risk of there being a general disappointment. ‘Now we’ve got this in place, now all our problems are solved.’ But I think that is a little naïve,” he said.

FINANCE

Stockholm stock exchange suffers worst day of 2018

The Stockholm stock exchange plunged by 2.8 percent on Thursday, making it the worst trading day of 2018.

Stockholm stock exchange suffers worst day of 2018
File photo: Stina Stjernkvist/TT
Stock markets across Europe suffered for the third day in a row as the arrest of a top Huawei executive in Canada has raised the spectre of an all-out trade war between the US and China.
 
For the Stockholm Stock Exchange, it meant a blood-red trading day that ended as the worst of the year thus far. The OMXS Stockholm 30 index fell by a combined 2.8 percent.
 
The majority of the companies on the index lost value, with the exception of Ericsson, which seemed to benefit from the news about its Chinese competitor Huawei with a 1.8 percent increase. Airline SAS also saw its stock increase, rising 4.2 percent thanks to sharp declines in oil prices. 
 
Among Thursday’s biggest losers was the mining company Boliden, which suffered a 6.1 percent drop. The stock of the Stockholm-based tech company Hexagon fell 5.6 percent.
 
Meanwhile, the stock of Swedish auto safety equipment manufactor Autoliv fell 6.1 percent on the news that it expects to pay some 1.8 billion kronor in fines as a result of an European Commission investigation into anti-competitive behavior in the EU. 
 
Stockholm was far the only European bourse to have a gloomy Thursday. The CAC index in Paris fell 3.3 percent, the DAX index in Frankfurt dropped 3.5 percent and the London Stock Exchange's FTSE index decreased by 3.2 percent.
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