Stockholm stock market recovers lost ground

The Stockholm stock exchange dropped by 4 percent at the opening of trading on Friday morning, but had recouped the losses by the afternoon amid mounting fears about the the global economy..

While Stockholm’s OMX 30 index recovered slightly by mid-morning, the exchange as still down 3.3 percent at 10.30am, reaching its lowest level since October 2009.

By 2pm, the exchange had recovered from morning loses and was only slightly done for the day.

After a 4.6 percent drop on Thursday, the exchange is down more than 10 percent for the week.

Stock markets across Europe experience drops on Friday morning, with the Franfurt exchange down 4 percent in opening trading, while the Milan stock market dipped 3.5 percent and shares in London were down 2.9 percent.

The dip in European markets comes following large losses in Asian exchanges overnight, as well as a decline in stock exchanges in New York on Thursday which were the worst in nearly two years.

Since the start of the year, the Stockholm stock market has lost roughly 20 percent of its value.

According to a new forecast from the SEB bank, concerns about a weaker global economy as well as intensfying problems in the eurozone will likely force the European Central Bank to tone down the need for interest rate hikes in the coming months.

However, SEB’s morning analyst report projects that the Riksbank will raise interest rates in September, and perhaps one more time during the year.

Håkan Frisén, head of economic research at SEB, cited a number of factors for the current stock market slump.

“You have a worsening crisis in Spain and Italy as well as differing views on what to do next to deal with the eurozone crisis,” he told The Local.

“We’ve had more bad news about the long-term sovereign debt crisis in Italy and policy makers aren’t prepared to address the problem.”

Other concerns weighing on global markets include disappointing figures in the United States’ housing and labour markets in recent months, as well as increasing concerns about the strength of the US economic recovery.

He added that the Stockholm market had been “under-performing” other stock markets for “a long time”.

“Swedish companies have more exposure to the global economy,” he said.

“And Sweden’s strong currency keeps pressure on profits.”

According to Frisén, Sweden’s “strong domestic foundation” has kept the krona strong.

“But if the crisis continues and gets worse, a somewhat weaker currency could help Swedish companies,” he said.

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Norwegian shares plummet by more than half on dilution fears

Shares in Norwegian Air Shuttle plummeted 63 percent when the Oslo Stock Exchange opened on Tuesday, as investors reacted to plans announced last week to convert a massive 44.5bn kroner ($4.3bn) of debt into new shares.

Norwegian shares plummet by more than half on dilution fears
Is the sun finally about to set on Norwegian? Photo: David Charles Peacock
The fall was so sharp that the exchange was forced to place the shares under “special observation”, a measure taken only when valuations are extremely uncertain. The shares then rebounded and by Tuesday afternoon were trading at about a 30 percent down on where they ended the week last Thursday. 
Mads Johannesen, investment economy at the online share trading company Nordnet, said that the company's rescue plan threatened to severely dilute existing shareholders.  
“Existing stockholders today wouldn't be left with much if they decide to fully dilute the bonds and convert them into equity, so it doesn't look promising,” he told The Local. “I guess they're going to survive in some form, but how they're going to look coming out the other side depends on the negotiations.” 
The international brokerage Sanford C. Bernstein on Tuesday cut its target price for the company's shares to zero. 
“Norwegian is at the end of the line,” the brokerage's analyst Daniel Roeska wrote in a note to clients announcing the decision. “Rounded to the nearest Krone, existing shares are all but worthless.”
The Norwegian government last month made the overwhelming majority of the 3bn kroner in loan guarantees it offered the airline conditional it successfully swapping some of its near 80bn kroner debt pile for equity. 
Norwegian is now negotiating with banks and bondholders to convert more than half of its debt into shares, before putting the plan to existing shareholders at a meeting on May 4.