UPDATED: Gloom and doom headlines about Monday’s spectacular stock market dive in Oslo turned more optimistic on Tuesday, as Norway’s all-important oil price rose more than 7 percent by midday and the Oslo Stock Exchange (OSE) was up again too. But then it fell back again, with several shocked companies still warning about possible layoffs and expecting help from the government.
Monday was, by all accounts, the worst day for Norway’s stock market since the finance crisis of 2008. After starting the day with double-digit declines in share prices battered by the oil price dive, the OSE’s index ended down 8.1 percent.
“For the oil companies, this is a complete catastrophe,” Kari Due-Andersen, chief economist at Handelsbanken, told news service E24. Shares in Norway’s state oil company Equinor fell 17.1 percent, while offshore firm Petroleum Geo-Services (PGS) fell a stunning 37.9 percent, followed by Aker Solutions down 32 percent, BW Offshore down 31 percent and Aker BP down 28.3 percent, all after the price of Norway’s most important export product (North Sea crude oil) fell even more.
On Tuesday, though, the oil price was moving up again, to nearly USD 37 around 11:30am. Many investors were bottom-fishing, buying up shares in otherwise strong companies and Norway’s biggest bank DNB at heavily discounted prices. DNB shares were up 4.5 percent before lunchtime, and Equinor was up 4.6 percent, before market sentiment sagged. Equinor closed down another 2.17 percent on Tuesday, at NOK 110.65 per share. Aker BP lost an additional 5.71 percent. DNB, however, ended up 3.23 percent, to close at NOK 126.30. The OSE index itself closed up, but only by 0.49 percent at 739.68.
Layoffs still loom
Companies in sectors hard hit by Corona virus concerns as well had already warned of pending layoffs. Hotel firm Nordic Choice, facing room cancellations and postponements of major conferences, sent out furlough notices to several hundred employees. “The travel business is affected very strongly,” Nordic Choice chief Torgeir Silseth told newspaper Dagens Næringsliv (DN). He claimed to have never experienced the extent of cancellations flowing in now, while room reservations for the important summer season were drying up at other hotels, too.
“We were doing very well, with long-term bookings up 42 percent in mid-February,” Erik Berg of the upscale Classic Norway hotels told DN. “But then it all stopped up.”
Airlines SAS and Norwegian Air were also caught in the turbulence, with SAS deciding to cancel 2,000 flights in March and confirming that an unspecified number of its employees were infected with the Corona virus. Norwegian, which saw its share price crash by another 27 percent on Monday, has also cancelled more flights, not least to otherwise popular destinations in Italy, which has all but closed its borders in efforts to stop the spread of the virus. With planes grounded, airline staffing was likely to be cut as well.
Many calls for government assistance
Many Norwegian companies faced with a sudden lack of business and potential cash-flow problems were expecting the government to ride to their rescue later in the day. That’s what happened during both the finance crisis in 2008 and the oil price collapse in 2014, and both Prime Minister Erna Solberg and Finance Minister Jan Tore Sanner held a press conference Tuesday afternoon to announce what Sanner called “concrete measures” to help Norwegian business. They include more flexible layoff rules (called permittering in Norwegian), postponement of tax payments and even refunds of taxes paid in advance, to help boost companies’ liquidity.
Norway has maintained a strong economy and recovered relatively quickly from the last oil price collapse six years ago. That can help again now, but economics professor Kristen Nordhaug issued a few warnings. Nordhaug, who specializes in economic policy at OsloMet university, thinks Norway isn’t as well-positioned to get over the oil price- and Corona crises as it was during the finance crisis of 2008.
“Norway got off easy then because China held raw commodity prices up,” Nordhaug told newspaper Klassekampen on Tuesday. “Norwegian oil prices also held up.” China was the locomotive but now it’s also been hit hard by the virus that began at home.
“If China can’t maintain demand, it will have consequences for the entire world economy,” Nordhaug said. Also Norway’s.