Investment Idea

Weaker USD and recessionary rate spread negative for OMX30

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29/11/2022 | 2 min read
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While the spread between short- and long-term rates is increasing in the US, there are also fresh signals of a slow-down in China. In addition, the USD has weakened significantly. All this is negative news for OMX30, dominated by its large exporting companies.

Price movements on the world's stock markets over the past week have been limited, influenced to some extent by the New York Stock Exchange being closed last Thursday and half of Friday due to Thanksgiving. Negative signals from China with street riots against the Covid closures set the tone at the opening of the stock markets in Europe on Monday, 28 November.

Momentum appears to be on the non-cyclical side as equity markets increasingly discount a recession next year. On Friday, 25 November, real estate, power companies and health care were the best performers on the New York Stock Exchange. This is also reflected in the yield curve in the US, where 2-year Treasury yields are now higher than 10-year yields and where the spread has increased in the last weeks (illustrated in the graph below). Bond market investors are more rational than the stock market.

Interest rate spread (in %) between 2- and 10-year US Treasury Bonds from 1 to 28 November 2022

Source: Data derived from

Investors seem to increasingly believe in a recession in 2023. This, combined with a weakening USD, should put pressure on the OMX30 from a fundamental point of view. This stock market index is dominated by large, listed companies, with most revenues coming from export markets in all major geographical regions, including China and the rest of Asia.

On top of this, the USD has weakened significantly since the beginning of Q4 2022. Generally, a weaker USD is a positive signal for the world's stock markets but hardly for the Stockholm Stock Exchange, where a weak currency (SEK) relative to the USD and Euro gives competitive advantages for domestic production but also positive currency translation effects on operations abroad. Now the opposite will be valid.

USD/SEK, a daily one-year graph

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

OMX30, a daily one-year graph

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

After its rapid upward price rebound in Q4 2022, there is also some downside in the OMX30 index. The last top was around 2053 index points on August 18, and the index currently trades at around 2096.

MACD has given a weak sell signal in the daily chart, with the possibility of a double top. The index looks technically slightly stronger from a weekly perspective.

OMX30, a weekly five-year share price chart

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

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 of numbers 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


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