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Stock market chaos: Here are the threats to the global economy



"High risk of going down to zero growth"

byTT

Photo by Vudi Xhymshiti, Susan Walsh / TT

Brexit and the US-China trade war are two factors that can threaten the global economy.

Trade war, Brexit and political turmoil. A perfect economic storm erupts.

Estimates predict an increase in unemployment as a result, which will bring the Swedish economy into the fall.

"Obviously, the job market is deteriorating pretty clearly," says Danske Bank Chief Economist Michael Gran.

Employment slowed down, and Michael Grann specifically cited the sharp fall in overtime, which TT can tell us today, and the alleged side effects in the form of upcoming layoffs. At the same time, real wages are hardly increasing. And when total income does not rise but rather falls, the economy slows. How the labor market is developing is "extremely important to the Swedish economy", according to Gran.

"I see a great risk of focusing on zero growth in Sweden," he says.

Duties are most important

In the background, they exaggerate the many potential economic and political problems. The trade war between the US and China may be the tip.

– I would define it as the most important, it will have a great impact on world trade.

Uncertainty about the British exit from the EU has long been plagued. And in the fall, the Brexit collapse threatens to renegotiate exports with reduced exports to a crowded UK as a likely consequence.

– The German economy is already thorny, even Sweden is affected, we have seven percent of exports there.

And when Europe's largest economy begins to hack, many countries will follow suit.

Purely political threats are more difficult to anticipate. Where the unrest at Hong Kong Financial Center is taking its toll, of course it's hard to say. But if it escalates, the repercussions in the region can be huge, winning the Grand Prix. In addition, there is a risk of escalating conflict between Iran and the Western powers.

1 of 2 | Photo: Björn Larsson Rosvall / TT

Has Sweden withstood the economic storms? Stock Photography.

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Overall, he estimates that the risk of a global recession is currently 50 percent.

– It really stands and weighs.

In the midst of all this, the world's central banks, with Sweden's Riksbank at the forefront, are operating with already inflated airbags. This means that low interest rates continue to move forward.

"If you have to say something positive, it's the small," Gran says.

Extremely low interest rates keep stock exchanges and property prices under wraps. For example, the Stockholm Stock Exchange has grown ten percent so far this year, which can be explained by the lack of alternative investment opportunities, when interest rates are in many cases negative.

On the other hand, there is little gas left if economic times get worse. Fiscal policy then becomes more important. And Sweden has a good chance of maneuvering with low sovereign debt.

Facts: Threats to the global economy

  • trade war, China and the US have been fighting a real trade war for about a year. The two countries have set high duties against thousands of Swedish kronor on goods exported to other countries. No peace is envisaged. Some analysts do not believe in a decision before the US election next fall. The trade war indirectly affects all world trade and thus slows down economic development.

  • Brexit. Also a sour dough that has been fermenting for a long time since the British voted to leave in the summer of 2016. As new Prime Minister Boris Johnson has promised to leave the EU by the end of October-November, with or without an agreement, the likelihood of the so-called heavy Brexit is increase. Without existing trade agreements with the rest of the EU, international trade risks becoming a major thorn.

  • Germany. Locomotive cutlets in Europe. The German economy has struggled over the past year, driven largely by the automotive industry. Growth was negative in the second quarter. The German decision-making economy attracts the rest of Europe, including Sweden, which has a large share of exports there.

  • China. China's miracle of growth is calming. GDP is not growing as fast as before, some analysts also believe that growth rates are much lower than public figures show. New figures show a grim trend for industrial production in the world's second-largest economy. The trade war with the US leaves its mark.

  • Hong Kong. Mass demonstrations have been going on for months. The protests are aimed at China and the question is how long the Communist Party intends to resolve the democratic demands of the Hong Kong people. A softer Chinese line may unleash such forces in mainland China, something Chinese politicians fear about the consequences.

  • Iran. Ever since the United States broke its nuclear deal with Iran last year, relations between the two countries have been frozen again. New US sanctions and "hijacked" tankers have created a conflict surface that may escalate further. The fact that much of the world's oil exports pass through the Hormuz Strait off the coast of Iran could have serious consequences for world oil supplies.


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