Bubbling witch's cauldron pressures financial markets

It's a lot now. Expensive oil, higher interest rates, budget concerns, inflation concerns and various reports of war between the US and Iran are becoming a dangerous mix. To that burden, one can add reluctance to AI investments. As if that were not enough, the war between Ukraine and Russia is going on in full force.

But in the scales there is also the fact that growth is good in many countries and the companies are expected to show good profits.

- It's a bit of a hodgepodge of many factors spreading in different directions right now, says Jens Magnusson, chief economist at SEB.

- It indicates a rather large uncertainty and possible volatility also in the coming weeks and months, he continues.

In the last week, there have been mixed messages on several fronts. US interest rates have rushed to historically high levels and occasionally pressured stock prices during the week. On Friday, interest rates had backed down and the Stockholm Stock Exchange was up 1.6 percent on Friday.

Even for the war between the US and Iran, there have been different turns. From the United States, there were first reports that new attacks were being planned, only to be denied by President Donald Trump.

The oil price has moved in step with the announcement, but on Friday the price for a barrel of North Sea oil (Brent) was $103.

Another economic stress factor is France. The country's interest rates have risen as a result of high government debt and question marks surrounding the next budget. Assessors have talked that a new euro crisis could be brewing.

The euro crisis began in 2009 – when Greece, Portugal and Spain had major debt problems – and the euro was put under severe pressure. This week, both France's prime minister and central bank governor have tried to quell concerns with statements.

The head of the European Central Bank, Christine Lagarde, also said at a meeting that the ECB has tools to stabilize financial markets if needed, without mentioning France.

- It is in itself a bit worrying that people say there is no danger. It is clear that then many people are thinking about whether it is even worse than we think, says Jens Magnusson.

Despite the many sources of concern, stock prices have been under pressure, but it is far from panic.

- The stock markets can obviously withstand quite a lot. If you had said a couple of years ago that long-term interest rates would go above 5 percent and oil prices above 100 dollars, you would have been quite convinced that the stock markets would do poorly, notes Jens Magnusson.

But he points out that the real economy is struggling and that companies continue to make nice profits, which calms the mood.

In the coming weeks, the companies will also present their quarterly reports.

- Companies can be a lifeline. Even the market has in some sense been a little surprised by how well the companies have done. The profit forecasts for the third quarter have been written up rather than down, says Jens Magnusson.

But all is not peace and joy there. The concern that the companies that invest heavily in artificial intelligence, AI, will not live up to expectations is there.

- There the values ​​are quite turned up. If it becomes difficult to bring home the profits that have been calculated, it is clear that a correction may be in the cards, says Jens Magnusson.