January 31, 2023

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Oslo's downfall turned into a rally: - More fear of war and weakness of key characters contribute to worse mood, says analyst

Oslo’s downfall turned into a rally: – More fear of war and weakness of key characters contribute to worse mood, says analyst

Friday was the worst day on the Oslo Stock Exchange since March 2020, and ended with a drop of up to four percent.

On the first trading day of the week, in the morning it seemed that the decline would continue, as the main Oslo index fell by about 1.3 percent. But in the last two hours of trading, the mood improved as oil prices started to rise slightly, and when the stock market closed, the main index was up 0.46 percent since Friday’s close.

Extreme fluctuations in global interest rates caused sharp falls in stock markets around the world last week, and doubts emerged in the markets as well on Monday.

European stock markets started the day higher, but the mood has since subsided. In the middle of the trading day, the Frankfurt Stock Exchange’s DAX was down 0.2 percent, the Paris stock index was down 0.6 percent, and the FTSE 100 in London was down 0.8 percent.

As with the Oslo Stocks, things also improved for the Central European bourses after the trading day, with indexes up about 0.3 percent.

Interest rates and recession fears

The most interesting thing about developments in the stock markets right now is how high interest rates are – especially fixed rates with longer maturities, says interest rate and currency analyst Engfield Burgen at DNB Markets.

Central banks have made clear that key interest rates will rise significantly in the short term, but rates with longer maturities reflect investors’ view of how long they believe the interest rate level will remain too high, which is why Borgen says it is the most important, among Other things, for stock market pricing.

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Currency and interest rate analyst Engfield Burgen at DNB Markets

Interest rate and currency analyst Engfield Burgen at DNB Markets (Photo: Peter Berntsen)

The US ten-year interest rate, often called the “ten-year interest rate”, is the most important reference interest rate in the world. Last week, the ten-year-old gained nearly 30 basis points in two days.

On Monday morning, the interest rate was at 3.75 percent – the highest level since 2010.

– It’s a powerful move. Burgen says that more fear of war and weakness of the main characters also contribute to a worse mood in the market, and adds:

How high interest rates can go, and how much it will hurt the market, along with the potential for a recession in large parts of the world, there are probably a lot of people excited today, including myself, says Burgen.

– seems unlikely

Director Audhild Asheim Aabø in Nordea is prepared because there will still be turbulent times in the stock market going forward.

The great bogey is the fear of a deep recession. We had an ugly end last week, as an increase in interest rates sent the stock market plummeting. Many may have been hoping to manage a soft landing, but I think the market is starting to pull back – because it seems unlikely.

Audhild Asheim Aabø, Director at Nordea.

Audhild Asheim Aabø, Director at Nordea. (Photo: Paul S. Amundsen)

She says that although US stock markets were significantly lower, earnings held up well and at times even rose.

– This in itself indicates that the market expects a period of decline in growth. I dare not predict whether we have reached the bottom. We will see a lot of turmoil in the market in the future. There’s still war, supply bottlenecks, and record inflation, Abu says.

Low oil prices

Recession fears, rising interest rates, and movements in major currencies have led to uncertainty in the commodity markets.

The price of oil fell on Monday morning, and a barrel of North Sea oil was traded at less than $85, compared to $86.09 a barrel at the end of the market on Friday. When the Oslo Stock Exchange closed, the price of North Sea oil was well above $87.

The strong appreciation of the US dollar contributes significantly to lowering oil prices. Burgen says the last time the dollar was this strong was back in 2002.

According to ANZ, the market is now factoring in the effects of a deep recession, and the OPEC oil cartel may intervene in crude markets again, according to Trading Economics.

Earlier in September, OPEC+ announced a supply cut and promised further action if volatile market movements persist.

The two oil giants Saudi Aramco and Crescent Petroleum have also warned that the drop in the oil price will lead to a lack of investment in the sector and that it is the underlying cause of the global energy crisis.

near rock bottom

The arrows pointed straight down for them US stock exchanges since mid-AugustIt is approaching its lowest level this year. An additional drop came on Wednesday, when the US central bank raised its key interest rate by 0.75 percent, at the same time that the rate trajectory for 2022 and 2023 was sharply revised upwards.

Wall Street ended the week sharply lower. The Dow Jones Industrial Average fell four percent for the week, to its lowest level since November 2020. The Standard & Poor’s 500 Index fell 4.65 percent, while the Nasdaq Technology Index fell 5.07 percent for the week.

The Nasdaq is down about 16 percent in just over a month, as risk capital has dried up completely and investors are looking for cheaper havens like government bonds and gold. The Dow Jones and Standard & Poor’s 500 followed closely and fell 12 to 13 percent in the same period.

Sour in Asian stock exchanges

The decline in the lion’s share of Asian stock markets was at the beginning of the week. In Japan, the Nikkei was down 2.6 percent, while the broader Topix was down 2.3 percent.

The Shanghai Composite Index in China weakened by 0.08 percent, while the Hang Seng Index in Hong Kong started increasing, but then fell by 0.9 percent. South Korea’s Kospi index fell 1.8 percent.

– It’s unusual to see Asian markets set the tone, JP Morgan’s currency analyst Benjamin Chatel told the Financial Times in the morning hours, noting that they usually follow what has happened in Europe and the United States.

It is believed that this is partly due to lower liquidity in the Asian markets.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links that lead directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.