Stockholm stock market in record fall

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

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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Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s.