The stock market's broad OMXS index closed on Friday just above the closing price from the previous Friday, despite a 2.6 percent drop on Monday.
Behind the declines was concern that the American economy was heading into recession after gloomy job figures, but also concern about a major war in the Middle East.
But macroeconomically, not much happened to justify the strong stock market reactions. The Vix index (which measures market anxiety) jumped up to levels we've only seen in connection with financial crises and during the pandemic. It seems like the reaction was still a bit exaggerated, says Jens Magnusson.
Chance to Stabilize
Market players are now waiting for calming macroeconomic signals from primarily the USA for the stock market to climb back to pre-crash levels.
At the beginning of the week, we got a sentiment indicator for the USA that indicated the economy isn't doing that badly after all. Such signals in combination with assurances from the American central bank that it will lower interest rates in line with market expectations, then I think the stock market has a better chance to stabilize, says Magnusson.
Can Shake Further
If instead there are indications that American inflation is heading in the wrong direction, or that the American central bank doesn't seem willing to lower interest rates, stock prices can start falling again, he continues.
But right now, the central bank doesn't seem particularly interested in going against market expectations.
