(ZH) Sweden Spinning Out Of Control Profile picture for user Tyler Durden by Tyl

Sweden Spinning Out Of Control

"Löfven, you have lost control of Sweden," the leader of the largest opposition party, the center-right Moderate Party, Ulf Kristersson, recently wrote in an article in the daily newspaper Aftonbladet, in which he criticized Swedish Prime Minister Stefan Löfven for failing to solve some of Sweden's biggest problems. According to Kristersson:
"Two areas that we [the Moderate Party] highly prioritize are law and order and integration. Because Sweden's biggest problems are there now.
"Last year, 306 shootings occurred and 45 people were shot dead. According to the police, the number of people killed has doubled since 2014. During the same period, the number of people who have been subjected to sexual abuse has tripled according to BRÅ [the Swedish Crime Prevention Council]...
"Concrete reforms are necessary. We have proposed them - the Social Democrats say no...
At the same time, we have an integration crisis: More than half of all the unemployed are born outside of Sweden. In our exclusion areas, [utanförskapsområden] there are schools where not even half of the students pass all subjects... Many children born in Sweden hardly speak Swedish, and there is extensive repression [in the name of] honor culture. Here too we have called for reforms, but the Social Democrats say no.
"Integration and immigration are connected. Therefore, a long-term and strict immigration policy is required. Temporary residence permits and requirements of financial self-sufficiency for family reunification should be the main rule.
"Requirements for knowledge of Swedish and financial self-sufficiency [should be conditions] for a permanent residence permit."
Kristersson's criticism demonstrates that the political mainstream in Sweden is fully cognizant of the country's fundamental problems. This criticism is especially significant coming from the Moderate Party: Kristersson's predecessor, Frederik Reinfeldt, who was prime minister of Sweden from 2006 to 2014 and chairman of the Moderate Party from 2003 to 2015, did not share these concerns. In 2014, Reinfeldt urged Swedes to "Open your hearts" to the refugees of the world.

"Now I ask the Swedish people to be patient with this. To have solidarity with the outside world... In the long run we create a better world in this way... It will cost money, we will not be able to afford so much else, but [these are] really people who are fleeing for their lives."
Kristersson, unlike the current Swedish government, appears to have woken up to the realities of Sweden.
One of the realities, according to the Swedish Civil Contingencies Agency (MSB) -- the state authority for community protection and preparedness -- is that terrorism is now a threat everywhere in Sweden, and therefore even smaller municipalities need to be prepared for terrorist acts to occur.
"First of all," said Jonas Eriksson, who is responsible for security in the public environment at MSB, "you have to be aware that this can happen in smaller cities... Then you have to think about what is in the municipality that can be vulnerable and sensitive." The statement came after police intercepted a potential terrorist act in the city of Östersund in August. The suspect was trying to drive into a crowd and run people over, according to Aftonbladet. He is also being investigated for links to Rakhmat Akilov, a terrorist who was convicted of killing five people by plowing a truck into a department store in central Stockholm in April 2017.
From the beginning of 2019 to the end of July, there were 120 bombings in Sweden, according to police statistics. The figure represents an increase of 45% over the same period last year, when 83 bombings took place. The south of Sweden has been particularly badly hit, with 44 bombings.
"At present, one can only really speculate on the reasons why. We have an increased problem with crime and exclusion," said Petra Stenkula, chief investigator at Police Region south. "It is possible that the supply of dynamite is good, whereas the supply is somewhat more limited when it comes to weapons today compared to before."
In the southern Swedish city of Landskrona alone -- a place of roughly 35,000 inhabitants -- since December 2018, there have been seven explosions or bombings. In August, the entrance to Landskrona's city hall was blown up.
"Those who do this want to disrupt organized society; we will not let that happen", said municipal council member Torkild Strandberg from the Liberal Party.
In August, another city in the south of Sweden, Linköping, experienced its second blast this year. Police found an object that they suspected was explosives. When it was destroyed by the national bomb protection squad, a powerful explosion occurred. It destroyed a police storehouse and damaged several other buildings. In early June, also in Linköping, an explosion blasted through a residential building. Miraculously, no one was killed, but 20 people were wounded. The police suspect that the incident was gang-related.
The constant insecurity that these incidents produce means that the demand for security guards and other security services has dramatically increased. Both private companies and municipalities have been asking to hire more security guards. According to Hans Tjernström, press manager at the Swedish Trade Association, an average grocery store spends around 600,000 kronor ($62,000) per year on guards and other items that have to do with security. According to a security industry source, over the next three years, security companies will need to recruit 5,300 more employees.
Rape and sexual assault also continue apace. In Uppsala alone, a picturesque Swedish university town, where 80% of girls do not feel safe in the city center, four rapes or attempted rapes took place in early August within four days. In Stockholm, two rapes occurred during the "We are Stockholm" youth festival in August, in addition to about a dozen other sexual offenses. At the "Piteå Dances and Laughs" summer festival in Piteå, another rape, involving ten men, took place.
In a recent op-ed in Aftonbladet, a member of parliament for the Moderate Party, Josefin Malmqvist, appealed to Morgan Johansson, who serves as Minister of Justice and Minister for Migration Policy, to "Stop the rapes – you are letting the women down." In her article, Malmqvist wrote:
"Exposure to sexual crimes has risen sharply during Morgan Johansson's (S) time as Minister of Justice: for the third consecutive year, the number of reported rapes in 2018 increased to 20 reported rapes per day. So far this year, the number of reported rapes has increased by 14 percent... In Sweden -- one of the world's most equal countries -- women's freedom is diminishing. That women do not have the same opportunity to move freely in the streets and squares without having to worry about being exposed to crime, is a serious restriction on women's freedom and self-determination. While more women are reporting sexual offenses, the rate of resolved rapes is still frighteningly low. A review of the rapes reported in recent years shows that only 5 out of 100 reported rapes lead to conviction."
She concluded:
"Now is the time to stop talking and start acting. The Moderate Party and the Christian Democrats' budget raised funding for the police, but more needs to be done. In May 2018, a majority in Parliament approved the Moderate Party's motion to tighten the penalty for rape. Since then, nothing has happened. It is high time for the Minister of Justice (S) to begin acting for Sweden's women."
Another population group that has been suffering under the lack of law and order in Sweden is children. According to BRÅ, there has been a significant increase in robberies against young people in recent years. In just a few years, the number of reports of robberies against people under 18 has significantly increased, from 1,084 reported robberies in 2015 to 1,896 in 2018 -- an increase of 75%. There have already been 1,247 reports of robberies against young people in 2019 so far. According to Sven Granath, a criminologist with the Swedish police, the increase in robberies against young people could be because it has become harder to rob older people or to steal from shops. "It has become harder and then they go after a group that cannot protect itself as well. They also have what other youths want, such as mopeds, phones and jewelry" said Granath.
It would appear that Prime Minister Löfven has indeed lost control of Sweden.

FT : Emerging markets ‘have space’ to kick-start growth

Emerging markets ‘have space’ to kick-start growth
All major EMs can ease either fiscal or monetary policy, research claims

Every major emerging market country has room to loosen either fiscal or monetary policy, or both, to counter the sharpest slowdown in developing world growth for a decade, according to a major investment house.

In July the IMF slashed its forecast for emerging market growth to just 4.1 per cent for the calendar year 2019, 0.3 points below its April estimate and the lowest figure since the height of the global financial crisis in 2009.

However, Patrick Zweifel, chief economist at Pictet Asset Management, a Swiss investment house with $190bn of assets under management, argued that, in contrast to a developed world beset by negative real (and in some cases nominal) interest rates and often large fiscal deficits, emerging nations have the policy freedom to tackle slowing growth.

“Lots of people are talking about whether [further] monetary policy [easing] is still an option for most developed markets and there is a lot of discussion about whether these countries should consider fiscal policy [instead],” Mr Zweifel said.

“This is a problem that emerging markets do not have, so they have much more room to counter the slowdown,” he said. 

Pictet’s analysis of 19 major emerging markets found that every country had either (or both) positive real interest rates — giving them room to ease in Pictet’s opinion — or an expected 2019 fiscal deficit of less than 3 per cent of gross domestic product — potentially allowing them the space to loosen policy, as the first chart shows.


Russia, South Korea, the Philippines, Indonesia and Thailand are in a position to loosen fiscal and monetary policy, according to Pictet, a potential growth driver at a time when economic activity across the globe has been buffeted by rising trade tensions and the seeming failure even of negative interest rates in the eurozone and Japan to kick-start growth.

Mr Zweifel said it was unusual for so many emerging nations to have scope to relax policy simultaneously, especially in terms of monetary policy.

Mr Zweifel said: “Sometimes you have a lot of countries that don’t have any room on the monetary policy side. They can’t cut rates, they have to keep them high because they are facing external liabilities, so if they don’t want to face the collapse of their exchange rates they don’t have any choice but to maintain [tight] monetary policy.”

He argued that, with the exception of Turkey and Argentina, the leading emerging markets “are not in an environment where cutting rates would lead to disproportionate falls in their currencies”.

He added: “Even the countries that have started to cut rates, such as Turkey, India and Indonesia, have even more room to cut further, which has been a bit of a surprise to me.”

On the fiscal front, the average budget deficit across the 19 countries has fallen to the equivalent of 1.9 per cent of GDP, the joint-lowest level since 2009, as depicted in the second chart.


Mr Zweifel said he expected to see more easing in monetary and fiscal policy, given that EM GDP growth, which he puts at “slightly below 4 per cent” is “clearly below its potential”, estimated at 4.5 to 5 per cent.

Moreover, “there is no inflationary pressure,” he said, with headline consumer price inflation well under control in Asia and Latin America, while the deterioration in the Europe, Middle East and Africa region, shown in the final chart, is largely due to Turkey, where overly lax monetary policy and a collapse in the lira led to a ferocious bout of inflation. 

Pictet saw particularly large scope for pro-growth policies in Russia, where “high real rates” (2.7 per cent, based on the Swiss group’s inflation forecast) and “very low public debt” (12.6 per cent of GDP) mean “it is extremely well positioned”.

Mr Zweifel is also optimistic about South Korea which “has cut rates once [in July] “and is likely to do another cut in October,” while Seoul “has announced a pretty strong fiscal stimulus increasing government spending by 8 per cent,” although this has yet to be passed by congress. 

India has also sought to revive flagging growth by unveiling a bold $20bn package of corporate tax cuts. While this has raised concerns about affordability, Mr Zweifel argued it was “quite a good decision that will have a long-term impact”, such as helping attract companies seeking to relocate because of the US-China trade war.

“My best guess is that there is still a lot of investment that can be done in India, so we are not talking about Trump’s tax cuts, where the economy was already running above trend and there was little scope for further investment,” he said.


The countries that are most constrained are in eastern Europe, where Hungary, Poland and the Czech Republic all have negative real rates, but Mr Zweifel argued these were among the few EM states that do not need any stimulus as they are already growing at a strong pace. 

Not everyone agreed with his upbeat take on the outlook for emerging markets, however. 

Maarten-Jan Bakkum, senior emerging markets strategist at NN Investment Partners, argued that most developing countries could only ease monetary policy if cross-border financial flows were strong — something that was more dependent on expectations of future US Federal Reserve policy that anything EM countries themselves had control over.

“[EM] central banks have been cutting rates since the beginning of this year mainly because of Fed expectations moving towards more easing,” he said. “That theme can go further but it’s not a given and it’s not something determined endogenously in EMs, it’s exogenous.”

He added: “If flows are weak, central banks cannot cut, that is clear. Emerging markets are very sensitive to global risk appetite and sentiment about global trade conflict and the Fed. I’m not sure that EMs have a lot of room on their own to ease monetary policy.”

Mr Bakkum feared emerging markets typically had less room still to ease fiscal policy. While China, South Korea and Taiwan may have some space to stimulate their economies, others faced headwinds that limited their policy freedom, he argued.

South Africa is struggling to plug a financial black hole at Eskom, the stricken state electricity monopoly, Brazil is still battling to put state finances on a sustainable footing, Turkey is constrained as a recession has weakened public finances, India has used up its remaining firepower and Russia’s scope to increase spending is dependent on oil prices.

“Emerging markets do not have more room for fiscal easing than developed markets,” he added.

John Paul Smith, partner at Ecstrat, an investment consultancy, was more downbeat still, arguing that even when emerging countries have had the space to cut interest rates it has not delivered concrete benefits. 

“The last year and a quarter, central banks in emerging markets have had much more room to relax than anybody thought. The problem that I have is that the easing was initially relatively reactive, as a response to slow growth, but I can’t think of any example of where growth has picked up because of easing, apart from one, Turkey,” he said.

Moreover, Mr Smith believed “we are seeing the limits of easing in some countries”, such as Brazil, where the real tumbled 8.7 per cent against the dollar since it cut rates by 50 basis points on July 31, followed by another half-point cut this month, and growth has still remained weak.

On the fiscal side, Mr Smith argued China “can’t stimulate more because they are stimulating a lot already, and if they do they will just increase moral hazard”, as evidenced by a rebound in the shadow banking sector, which took its largest share of total lending since at least 2013 in the second and third quarters of the year.

“A lot of companies are being offered loans but are turning them down because they are not getting the orders,” he added.

Mr Smith lamented the lack of pro-growth structural reforms, aside from “a little in Brazil and India” and, even in the latter, he feared the attempt to revive “animal spirits” by cutting corporate taxes was unlikely to succeed until there was greater clarity around the country’s fledgling bankruptcy process, which would encourage banks to increase lending.

Like Mr Bakkum, Mr Smith feared the fate of emerging markets was still largely determined by the actions of the developed world, rather than anything they themselves had control over.

“You don’t want to buy emerging markets full stop,” he said. “The outlook for growth is dismal. It has been dismal, it’s still dismal and it will continue to be dismal unless they get serious about reform. 

“I think the only chance for emerging markets is if there is a fiscal stimulus in the developed world and they get external help. EMs have reached the limits of their autonomy,” Mr Smith added.

“At some point there will be some sort of helicopter money in the west or something to address the demographic issue, unsticking money held by older people [who are not spending it]. That’s the next time EM will outperform, but I believe we will see one major emerging market going into crisis before we get to that point.”

>>> US After Hours



After Hours Summary: PRGS -15%, MU -6.5%, CAMP -5% following earnings/guidance, LTM +44% on Delta partnership/investment news

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: MTN +3.9%

Companies trading higher in after hours in reaction to news: LTM +44.3% (LATAM Airlines and Delta [DAL] confirm airline partnership in Americas; Delta will invest $1.9 bln for 20% stake in LATAM), PSNL +5.8% (awarded new task order from VA's Million Veteran Program; total awarded to-date is now approx. $145 mln), LVS +4.3% (to join S&P 500), SGH +3.1% (responds to "inaccurate and misleading statements"; will address on earnings call Oct 3 at 4:30 p.m. ET), NKTR +1.4% (to join S&P MidCap 400)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: PRGS -15.3%, MU -6.5%, CAMP -5.4%

Companies trading lower in after hours in reaction to news: GOL -9.4% (CNBC reporting Delta planning to sell its minority Gol stake), TDW -2% (light volume; announces organizational changes and continued streamlining of operations; COO Jeffrey Gorski and General Counsel/Corporate Secretary Bruce Lundstrom to resign effective September 30), EBAY -0.8% (downgraded to Market Perform from Outperform at Wells Fargo)

Micron (MU) leading chip stocks lower after hours (ETFs: SMH -1.1%, SOXX -0.9%): AMAT -3.2%, WDC -2.6%, LRCX -2.4%, KLAC -1.8%, XLNX -1.2%, AMD -1.1%, TXN -0.9%, INTC -0.8%, AVGO -0.7%

FT : Ericsson braced for 5G blow as it prepares for corruption penalties

Ericsson braced for 5G blow as it prepares for corruption penalties
Swedish group books provisions of $1.2bn amid contracts battle with Huawei and Nokia

Ericsson said its 5G rollout would take a hit after booking provisions of $1.2bn ahead of the conclusion of US probes into overseas corruption allegations.

The Swedish telecoms equipment company, which competes with Huawei and Nokia for 5G equipment contracts, has been under investigation by US authorities since 2013.

The group said on Thursday it had identified violations of the US Foreign Corrupt Practices Act as well as its own code of ethics in China, Saudi Arabia, Kuwait, Indonesia, Djibouti and Vietnam. Of the total charge, $1bn relates to anticipated penalties and $230m to costs associated with the investigations.

While Ericsson has maintained its financial targets, UBS said the provision would reduce its year-end net cash from SKr19bn to about SKr7bn ($719m).

This will hit Ericsson’s plans as it battles with Nokia and Huawei for 5G contracts. “That is the reality,” Borje Ekholm, chief executive, said on Thursday.

The total provision represents about 4.5 per cent of Ericsson’s market value, slightly higher than expected, according to Citi analysts. The company said it would book the charge in its third quarter and that it expected the matter to be formally resolved by the end of the year.

The Scandinavian telecoms sector has been hit by a series of scandals in recent years. Swedish operator Telia was fined $965m in 2017 by US, Dutch and domestic authorities over claims of bribery in Uzbekistan. Corruption allegations relating to the central Asian country had hit Norway’s Telenor the previous year, with executives forced to stand down.

Ericsson itself agreed last year to a $146,000 settlement after it was found to have breached sanctions on South Sudan.

Mr Ekholm, who has led the company since late 2016, said the $1bn hit would prove an important step in the former industry bellwether’s turnround. “This is a sad chapter in our otherwise proud history,” he said.

Mr Ekholm said 49 of the 65 employees scrutinised in an internal review had left Ericsson as a result. However, he said it was too early to talk about whether authorities would pursue criminal prosecution.

He also said it was “embarrassing” that Ericsson had not taken faster action in 2013 when the US Securities and Exchange Commission launched its investigation, and that the company had missed a number “red flags”. However, he said, the company had vastly tightened its internal compliance processes in the past two years.

“It is fair to say, and maybe it’s a bit cavalier, there are 100,000 people in the company. There were some rogue employees. We needed a system where we can identify them quickly,” he said.

Xavier Dedullen, chief legal officer, said the company had “zero tolerance for corruption”.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • PSO -16.5% (provides updated guidance for first nine months of 2019; sees flat sales growth) FUL -5.8%, FDS -3.7%, ACN -1.2%

Other news:

  • ENTA -21.6% (announces "positive" results of ARGON-1 study of its lead FXR Agonist, EDP-305, for the treatment of NASH)
  • BTAI -10.8% (commences underwritten public offering of $19.0 mln shares of common stock)
  • PLYM -6.9% (prices offering of 3 mln shares of common stock at $18.00 per share)
  • CTRP -4.5% (commencement of offering of an aggregate of 31,304,352 American depositary shares by shareholder Baidu (BIDU))
  • FOR -2.3% (prices offering of 5.25 mln shares of common stock at $17.50 per share)
  • ERIC -2.1% (makes SEK 12 bln provision related to resolving SEC/DOJ investigations)

Analyst comments:

  • HDS -1.6% (downgraded to Mkt Perform from Outperform at William Blair)
  • HRI -2.1% (downgraded to Neutral from Buy at BofA/Merrill)
  • HDS -1.6% (downgraded to Equal Weight from Overweight at Barclays)
  • TKR -1.3% (downgraded to Underperform from Neutral at BofA/Merrill)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:

  • RAD +9.2%, CAG +4.5%, AIR +3.4%

Select Marijuana names indicated higher this morning after U.S. House of Representatives passes SAFE Banking Act:

  • CTST +11.5%, OGI +5%, CRON +4.4%, APHA +4.2%, CGC +3.7%, ACB +3.4%, HEXO +3.1%, TLRY +2.6%

Other news:

  • BYND +19.2% (McDonald's (MCD) says it will be conducting a 12-week test in Canada of a new plant-based burger made with a Beyond Meat plant-based patty)
  • WSC +5.6% (Reuters report suggests potential WillScot [WSC] bid for Mobile Mini [MINI])
  • VNRX +3.1% (continued strength)
  • MINI +1.4% (Reuters report suggests potential WillScot [WSC] bid for Mobile Mini [MINI])
  • BIP +1.1% (Brookfield Infrastructure Partners announces unit split and creation of an exchange corporation-Brookfield Infrastructure Corporation)
  • OPTN +1% (signs agreement between its Norway-based subsidiary OptiNose AS and Currax Pharma)

Analyst comments:

  • PSNL +4.5% (upgraded to Buy from Neutral at BofA/Merrill)
  • AEIS +2.8% (upgraded to Buy from Neutral at DA Davidson)
  • EXAS +2.6% (initiated with Outperform at Oppenheimer; tgt $130)
  • SQ +2.6% (upgraded to Outperform from Market Perform at Wells Fargo)
  • VEEV +2.4% (upgraded to Outperform from Mkt Perform at Raymond James)
  • WHR +2.4% (upgraded to Overweight from Neutral at JP Morgan)
  • BRKR +2.3% (upgraded to Buy from Neutral at BofA/Merrill)
  • HOLX +2.1% (upgraded to Buy from Neutral at BofA/Merrill)
  • ABBV +1.6% (upgraded to Buy from Neutral at Citigroup)
  • TTD +1.3% (upgraded to Neutral from Reduce at Nomura)