WEEKLY UPDATE – Ericsson weigh heavily on the Stockholm stock market after disappointing earnings.

• German bank Hypo fails EU stress test

The OMX Stockholm 30 closed down 0.71 percent Friday after a disappointing second quarter report by telecom giant Ericsson and as investors awaited the outcome of crucial "stress tests" on Europe's banking sector. Compared to last week the index was up 0.21 percent.

Swedish and European bank were mostly lower ahead of the results of the tests, expected after the market closes on Friday.

On Friday macroeconomic reports indicated improvement in global economic sentiment. The World Trade Organisation said Friday it expects global commerce to grow 10 percent this year, after minus 12 percent last year. Britain’s economy surged in the second quarter of 2010, with gross domestic product expanding by 1.1 per cent, its fastest pace of growth in four years. Germany’s economy was described as being in “a party mood” after its business sentiment hits three-year high.

Shares in Stockholm-based telecom giant Ericsson tumbled more than 7 percent Friday after posting lower-than-expected earnings, partly explaned by an industry-wide shortage of key components that contributed to an 8 percent decline in sales.

“The sales were disappointing because clearly the global shortage in parts is widespread and not only affecting Ericsson and the telecom industry, but also related industries as well,” Ilkka Rauvola, an analyst in Helsinki at Danske Bank, told the New York Times.

Truck maker Scania increased Friday after the company reported a robust return to net profit well above analysts’ expectations as global demand recovered and operating margin reached a record-high. Also its peer Volvo posted upbeat earnings Thursday and stood by its forecast of recovery in US and European markets.

Dutch-Swedish chemical group Akzo Nobel said on Friday its second-quarter net profit soared but that it remained cautious over the pace of the economic recovery.

Shares in defense company Saab -- maker of the Gripen fighter jet – dived Friday as it said second quarter net profits fell almost 40 percent – largely because of terminated customer contract. The company cut its outlook for the rest of the year.

Swedbank, Sweden's fourth biggest bank, said Thursday that it swung to a second-quarter net profit of 1.57 billion kronor ($212 million) from a loss of 2.01 billion kronor a year earlier. The result was more than double analyst expectations as loan losses came in well below forecasts.

Shares in Swedish SSAB, the world’s largest supplier of high-tensile steel, dived more than 6 percent in Stockholm midday trading after it said the pace of recovery in the sector would slow next quarter.

Swedish-Swiss engineering group ABB said Thursday its net income fell 8 percent to 623 million dollars in the second quarter, but issued an upbeat forecast for the rest of 2010.

Since the turn of the year the OMX Stockholm 30 index is up 11.14 percent.

This article has been published at The Swedish Wire and Nasdaq OMX Nordic.