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  • Stock markets are still being propped up by hopes about restarting economies and stimulus measures. This past week we have also seen a tragic series of events in the United States − after the Minneapolis police caused the death of an African-American man in their custody, George Floyd − but subsequent widespread demonstrations and vandalism have not significantly affected financial markets. Over the past month until June 2, Swedish and American stock markets gained 8-11% in local currencies, though they remained 5-6% below year-end 2019 levels.

  • The strength of the stock market is impressive. In the United States, the broad S&P 500 equity index gained 3.2% last week. This was a 32% upturn from its March 23 low. Risk appetite is fuelled by hopes of a COVID-19 vaccine, continued signals of virus stabilisation, restarted economies and data showing that growth bottomed out in April. The Swedish krona is also benefiting from this environment. Medical advances will be important to risk appetite as well as business and household confidence, in a world that is likely to face virus-related setbacks. Heightened security and trade policy concerns have not been enough to lower market willingness to take risks.

  • At the end of March, about 90% of the global labour force was wholly or partially locked out of its usual physical workplaces, but today's news headlines are instead dominated by the launching of exit plans from such coronavirus-related restrictions. This suggests that global growth reached its absolute low point in April, as various quick indicators confirm. The focus of market attention is now increasingly on the recovery and what new stimulus packages are needed.

  • In the last issue of Investment Outlook (published in February), we predicted unexpected news and dramatic fluctuations in financial markets. This proved more correct than we would have wished. The COVID-19 crisis is having – and will continue to have – a major impact on economic growth, the functioning of economies and financial market performance, but our forecasts indicate that the unusually deep low point of the downturn is near. 

  • The COVID-19 outbreak, combined with the collapse in oil prices, will have a major negative impact on the economy in Norway. Mainland GDP (excluding oil, gas and shipping) will contract by 7.4 per cent in 2020, followed by a 5.2 per cent rebound in 2021. Despite a forceful policy response, the economic recovery will be slow and will be hampered by falling petroleum sector demand and high unemployment.