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Europe: Stocks rise on Swedish vote relief

2018-09-10T132221Z_1690158051_RC19B17C6470_RTRMADP_3_MARKETS-EUROPE-STOCKS.JPG

[NeW YORK] European equities rose Monday as the far-right failed to make as large gains as expected in Swedish elections, while US stocks ended mostly higher, cautiously resisting pressure from soaring trade war concerns.

In Europe, investors appeared relieved about the dampening prospect of a "Swexit," giving Stockholm's benchmark OMX 30 index of major companies a boost of 0.4 per cent in value at close of trade, while the Swedish krona steadied.

There were similar gains for the Frankfurt and Paris indices, as investors welcomed the thinning prospect of a Swedish bid to follow in Britain's footsteps and seek to withdraw from the European Union.

"The risk of 'Swexit' is low," said Robert Bergqvist, chief economist at banking group SEB.

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Meanwhile, he warned that the inconclusive vote in Sweden - long seen as a bulwark of liberal values - has once again exposed simmering tensions over immigration in the European Union.

"Sweden risks becoming a battering ram in an increasingly polarised international debate, and the ability of Swedish political leaders to manage the new challenges is likely to influence what path other countries will choose," Mr Bergqvist said.

Oanda analyst Craig Erlam agreed.

"The election...once again serves as a reminder to the EU that free movement may be fundamental to its ideals - but it's also contributing to the rise of nationalist parties," Mr Erlam wrote.

POUND SEES FRESH GAINS

More broadly, European investors were looking ahead to a busy week as the European Central Bank and the Bank of England prepared to make new monetary policy decisions.

The London FTSE index 100 was flat as the pound rallied for the second time in a fortnight and investors held their breath for a possible breakthrough on Brexit negotiations.

EU Brexit negotiator Michel Barnier on Monday said it was "realistic" to expect agreement on a divorce deal with London within the next eight weeks.

"Clearly there is a feeling that a lot of Brexit pessimism and no-deal risk has been priced in, which is why we're in a state of such sensitivity to any reports that indicate a breakthrough will come," Erlam wrote.

Across the Atlantic, the broad based S&P 500 rose, though Charles Schwab analysts said "caution may be setting in amid lingering global trade uneasiness."

The rise came even as Hong Kong and Shanghai had led a broad sell-off after US President Donald Trump threatened to impose tariffs on Chinese imports.

"The growing fears of an all-out tit-for-tat trade war between the world's two largest economies are likely to fuel risk aversion, ultimately punishing global stocks and emerging markets," said Lukman Otunuga, research analyst at FXTM.

Concerns of a brewing crisis in emerging economies have also hit financial markets in recent weeks.

AFP