Sunday night’s general election in Sweden, in which the right-wing bloc holds a narrow one-seat lead over the ruling party and its allies, has so far failed to impact the krona, which traded little changed at 10.67 per euro as of 9:30 a.m. in Stockholm.
(Bloomberg) — Sunday night’s general election in Sweden, in which the right-wing bloc holds a narrow one-seat lead over the ruling party and its allies, has so far failed to impact the krona, which traded little changed at 10.67 per euro as of 9:30 a.m. in Stockholm.
The country’s currency has slumped almost 14% against the dollar and nearly 4% against the euro this year on the back of a broad-based selloff of risk-sensitive assets.
But political risks may emerge further out. While a right-wing victory seems likely at this point, forming a new government is set to be a “difficult, drawn-out process,” Swedbank analysts Knut Hallberg and Glenn Nielsen said in a note.
The analysts say that a tricky process to form a new government won’t increease the risk premia on Swedish assets, but “a new government that fails to the address the societal challenges and improve growth potential could eventually have a negative impact on the market in the long run.”
Elsewhere in markets, Swedish government bonds mostly fell, tracking wider moves among European peers. In equities, school group AcadeMedia AB led gains in Stockholm, with health-care providers Ambea AB and Humana AB also among the best performers. The moves come as the Social Democrats’ side has mulled introducing limits on taxpayer-funded sectors, including restricting dividend payouts.
The final election outcome is not expected until Wednesday, but Nordea economist Gustav Helgesson says Sweden is likely to have another “weak minority government.”
Robert Bergqvist, a senior economist with SEB, says that while krona is little changed, the economic situation requires a synchronized fiscal and monetary policy.
Read More: Sweden Headed for New Political Era as Right Wing Nears Win (1)
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