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Scandinavian woes deepen

Bearish patterns in markets and disquiet over rates add to the mix

We’ve heard of zombie companies, piles of cheap cash needed to keep them alive. Now the Northern hemisphere’s cervid family, which includes mule, red, sika and white-tailed deer, caribou, elk, and moose, is suffering from chronic wasting disease, a version of transmissible spongiform encephalopathy. Another blow to the woes afflicting Scandinavian nations which I warned of almost three years ago.

My most recent article on the subject (6 September 2018), written ahead of a general election in Sweden, warned that the ruling centre-left might lose their traditional support; they did but then managed to form a government in January this year. Over these months, the Swedish krona has weakened from 10.12 per euro to 10.85, in turn its weakest since 2009 when it managed a record 11.79 in the financial crisis; targets were given in the article. Against its Norwegian counterpart, it shrivelled from 1.02 to 1.10 krona per Nokkie krone. Likewise, against the US dollar, where at 9.70 per greenback it’s at its weakest since the tech stock bust in 2001, when one needed 11.05 krona. I feel we’re likely to match these record highs this year.

Likewise trading at extreme levels are interest rates, sovereign 10-year bonds yielding a record low -0.43 per cent from a high at 4.60 in 2007, the Riksbank deposit rate minus 1 per cent after a surprise 25 basis point increase (less negative) last month; the deposit rate has been negative since 2014. More shocking still, the Financial Times reported that Stefan Ingves, governor of the central bank since 2006, appeared at a finance industry event to deliver a speech in May – flanked by three bodyguards; a spokesman for the central bank declined to comment. I mean, we know about the unrest in working class suburbs of industrial cities, but this!

Looking at the main Stockholm share index, the OMX 30, I had been bullish in the second half of 2018. It did rally to 1,700 in April this year (a hair’s breadth from 2015’s record at 1,720), but has since slumped back down to the lower levels of the last three years. We now feel that price action since mid-2017 is a broadening top, and a similar pattern can be seen in a handful of European indices – a bearish pattern. Still incomplete, a monthly close below 1,475 would probably tip the balance. Copenhagen’s OMX 20 has a similar problem at the 1,100 area.

Over in Norway its vast sovereign wealth fund announced it would ease up on energy investments while holding on to shares in companies focusing on renewables. This was not a response to climate change but sensible diversification away from its core industry, thus avoiding the plight of Enron employees who were encouraged to buy their company's shares and pop them into savings and pension plans: ergo, no income, no savings and no pension. In terms of green and squeaky clean, 2016 data from Eurostat put Norway and Sweden at the top of Europe’s worst offenders for electronic waste, 19.6 and 16.4 kilos per person respectively – in just 12 months.

To this mix add in Friday’s reports that President Trump was interested in buying Greenland, a self-governing Danish territory of 56,000 inhabitants, two MPs in Copenhagen, and a strong pro-independence movement. Newly installed prime minister, Ms Mette Frederiksen, visited the island over the weekend whose official tourism site @GreenlandMFA tweeted "We’re open for business, not for sale".