Is it time for another recoil?

After a one-week drop of around 13% (2-8 April) following President Trump's surprise tariff announcements, global equity markets have since recovered quickly. However, the weakening of the US dollar appears to be a lasting consequence of the uncertainty surrounding the Trump administration. For the first time in many years, the US dollar's role as the world's reserve currency is being challenged, at least in part.

While the USD has weakened towards most currencies, the SEK has appreciated by around 5% against the EUR and 16% against the USD since 1 January 2025. The fall in the USD/SEK exchange rate from 11.15 at the start of 2025 to 9.58 at the time of writing is negative for the majority of large OMX companies.

The OMX30 index is dominated by large companies in the engineering, mining, and telecommunications sectors which export goods and services. Examples of these companies include Atlas Copco, Epiroc, Ericsson, Sandvik, SKF and Volvo AB, as well as Volvo Cars.

The USD/SEK exchange rate tends to have the largest relative impact on the earnings of Boliden, Ericsson, Skanska and Volvo AB. Skanska is an example of a company with about half of its operations in the United States. A stronger SEK also has a negative impact on the earnings of OMX companies when the earnings of foreign subsidiaries are translated from EUR or USD into SEK. However, a weaker USD also has a negative impact on Sandvik's exports, as well as those of the pulp and paper sector (Stora Enso, Holmen and SCA), whose main competitors are mainly based in North America.  

Larger companies often hedge their currency flows over a period of around six months, meaning that the impact of a stronger SEK will gradually be reflected in their quarterly earnings for the rest of 2025. In addition to changes in tariffs between Europe and the United States, currency fluctuations will also affect corporate pricing. In other words, Swedish companies will need to consider whether they should lower their prices to compensate for these effects.

Another factor that could affect the future price of the OMX30 is the weaker-than-expected Q1 2025 results. As of Tuesday, 6 May, 65 Swedish OMX companies had reported their Q1 2025 results. In terms of operating results, 47% were lower than expected, while 53% fell short of sales expectations. Once again, the Swedish banks appear to be the OMX30 sector that performed best relative to expectations. Together with weak industry data, such as the five-year low in North American heavy vehicle orders in April 2025, this suggests that investors should currently limit their exposure to cyclical sectors. The OMX30 index is dominated by cyclical companies. Therefore, it might be suggested shorting the OMX30 index.

From a technical perspective, the OMXS30 index is currently trading below the resistance level of 2,500. The first level of support is EMA9, currently at 2,424. This is followed by the 2,400 level and the MA20, which is currently at 2,355.

US non-farm payrolls for April came in at 177,000 on Friday 2 May 2025 versus expectations for 130,000 new jobs. This boosted stock market indices in the US, where both the S&P500 closed 1.5% higher on Friday and the NASDAQ rose 1.6%. At the same time, US interest rates also rose significantly.

For Q1 2025, with 72% of S&P500 companies reporting by 25 April 2025, 76% have reported positive EPS (Earnings per Share) surprises and 62% have reported positive revenue surprises. However, from 31 March to 30 April 2025, Wall Street analysts have cut their Q2 2025 EPS estimates by an average of 2.4%. The largest EPS estimate cuts were seen in Energy with 14.8%, followed by Industrials with 4.7% and Consumer Discretionary with 4.0%.

On Wednesday 7 May, interim reports are due from Loomis, Lundin Mining and Skanska in Sweden, Novo Nordisk in Denmark, Storebrand, DNB, Schibsted  and Aker BP in Norway, Schaeffler in Germany and Walt Disney in the US. The macro agenda starts with Japan's services PMI (Purchasing Managers’ Index) for April. Then Sweden's CPI (Consumer Price Index) for April is scheduled, followed by Germany's VDMA Machinery Orders and Eurozone Retail Sales, both for March. The main event of the day will be the Fed's (Federal Reserve) interest rate announcement in the evening, according to European time. Weekly oil inventories statistics (Department of Energy) will be received from the US.

On Thursday 8 May, interim reports from Balder, Holmen, Hufvudstaden and Securitas in Sweden, Maersk in Denmark, Rheinmetall in Germany, Nintendo and Toyota in Japan and Anheuser Busch Inbev, Conoco Philips and Shopify in the US are expected. On the macro news front, Germany's trade balance and industrial production for March, followed by Italy's CPI for April. The US contributes with weekly intial jobless claims and wholesale inventories in March will start. Interest rate announcements from the Bank of England, Sveriges Riksbank and Norges Bank are also expected

Bonava and Orkla in the Nordic region, and Enbridge in the US, are among the few companies posting their interim reports on Friday, 9 May. China's trade balance for April will kick off Friday's macro news feed. This will be followed by Swedish household consumption and industrial orders in March, as well as UK industrial production also for March. In the afternoon (European time), Canada will release its April unemployment figures.

The S&P 500 performed strongly in the second half of April. A break above the MA200, currently at 5,755, is needed for the long-term trend to turn positive. However, the S&P 500 is currently bouncing off resistance at 5,700 and the next support level on the downside is at 5,565. A break below this level could see 5,500 as the next target. Perhaps a sell-off is needed to gather energy for the next wave to break the long-term negative downtrend.

The NASDAQ bounced off resistance at MA200 and fell below the support level of around 19,000. The next support level on the downside is EMA9, which is currently at 19,566. If this level is broken, the next level to watch is 19,200.

The German DAX is trading close to previous highs following a strong rally from early April lows. This rally has been exceptional, so taking some profits around these levels may not be a bad idea. On the downside, the EMA9, currently at 22,583, serves as the first level of support, followed by 22,325.

The full name for abbreviations used in the previous text:

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence