European stocks climb on Swedish vote relief

LONDON: European equities rose Monday as the far-right failed to make as large gains as expected in Swedish elections, with investors appearing relieved about the dampening prospect of a "Swexit".

Stockholm's benchmark OMX 30 index of major companies added 0.6 percent in value, while the Swedish krona steadied.

There were similar gains for the Frankfurt and Paris indices after the Swedish vote, which once again exposed simmering tensions over immigration in the European Union.

"The election... once again serves as a reminder to the EU that free movement may be fundamental to its ideals -- but it's also contributing to the rise of nationalist parties," said Oanda analyst Craig Erlam.

- 'Swexit risk is low' -

Neither the centre-left nor the centre-right bloc obtained a majority in Sweden's legislative vote.

That has left the nation's Social Democratic Prime Minister Stefan Lofven with the prospect of lengthy talks to form a new coalition administration.

The far-right Sweden Democrats meanwhile solidified their position as third-biggest party and kingmaker -- albeit with a lower score than they had expected.

The vote has dented the prospect of a so-called "Swexit", or Swedish exit from the European Union, following Britain's shock 2016 referendum to leave the bloc.

"The risk of 'Swexit' is low," said Robert Bergqvist, chief economist at banking group SEB.

"Sweden risks becoming a battering ram in an increasingly polarised international debate, and the ability of Swedish political leaders to manage the new challenges is likely to influence what path other countries will choose," he added.

More broadly, European investors were looking ahead to a busy week as the European Central Bank and the Bank of England prepared to make new monetary policy decisions.

The London FTSE index 100 was flat as the pound rallied for the second time in a fortnight and investors held their breath for a possible breakthrough on Brexit negotiations, according to analyst Erlam.

"Clearly there is a feeling that a lot of Brexit pessimism and no deal risk has been priced in which is why we're in a state of such sensitivity to any reports that indicate a breakthrough will come," he wrote.

Across the Atlantic, US stocks were "trimming last week's decline that commenced in September, shrugging off lingering global trade concerns," a note from Charles Schwab analysts said.

The rally came even as Hong Kong and Shanghai had led a broad sell-off after US President Donald Trump threatened to impose tariffs on Chinese imports.

- Trump tariffs -

There was some relief that Trump did not immediately impose levies on $200 billion of Chinese goods after the passing of a deadline for public consultation.

The threatened tariffs would add to the $50 billion in imports already targeted and mark a major step up in the long-running battle between the world's top two economies.

Trump told reporters on Air Force One Friday that "there's another $267 billion ready to go on short notice if I want".

That would cover virtually all goods the United States imports from China. Beijing has threatened to retaliate against any measures out of Washington.

Fears of such an outcome left investors around the world feeling cautious as a new week of trading got under way, wrote Lukman Otunuga, research analyst at FXTM.

"The growing fears of an all-out tit-for-tat trade war between the world's two largest economies are likely to fuel risk aversion, ultimately punishing global stocks and emerging markets," he said.

Concerns of a brewing crisis in emerging economies have also hit financial markets in recent weeks.

"With turmoil in Turkey and Argentina triggering contagion fears, appetite for emerging market assets and currencies is likely to continue diminishing," said Otunuga.

"In the (emerging market) currency space, the outlook remains tilted to the downside in the near term, especially for those currencies with high current account deficits," he added.

- Key figures around 1335 GMT -

Stockholm - OMX 30: UP 0.7 percent at 1,625.90 points

New York - Dow: UP 0.4 percent at 26,020.68

London - FTSE 100: FLAT 0.4 percent at 7,279.35

Frankfurt - DAX 30: UP 0.3 percent at 11,997.50

Paris - CAC 40: UP 0.7 percent at 5,286.37

EURO STOXX 50: UP 0.7 percent at 3,317.41

Tokyo - Nikkei 225: UP 0.3 percent at 22,373.09 (close)

Hong Kong - Hang Seng: DOWN 1.3 percent at 26,613.42 (close)

Shanghai - Composite: DOWN 1.2 percent at 2,669.48 (close)

Euro/dollar: UP at $1.1601 from $1.1553 at 2100 GMT

Pound/dollar: UP at $1.3031 from $1.2920

Dollar/yen: UP at 111.07 yen from 110.99 yen

Oil - Brent Crude: UP 58 cents at $77.41 per barrel

Oil - West Texas Intermediate: UP 37 cents at $68.12