The Swiss stock market widened its losses somewhat late Thursday morning, like the European markets. The markets are still affected by the announcement from the American Federal Reserve (Fed) which is preparing to slow down the pace of its rate cuts.
The Fed certainly lowered its key rate by a quarter of a point as expected but suggested that there could only be two new cuts next year, while it still mentioned four in September. “If this were to be the case, the rate gap between the Fed and the ECB should widen once again and penalize, among other things, the euro against the dollar,” comments John Plassard of Mirabaud Banque.
This brake from the Fed “shocked and destabilized the markets”, notes the Landesbank Baden-Württemberg LBBW in an analytical note. The latter “obviously reacted aggressively”, comments the Swissquote expert, Ipek Ozkardeskaya, estimating that the Fed which “started to reduce its rates barely three months ago with a massive reduction” is now acting in a “erratic”.
Conversely, UBS analysts consider this positioning “logical” in view of the economic situation. And, “as is often the case, the market’s expectations of the Federal Reserve were too optimistic,” says Frank Sohlleder at ActivTrades. The latter has in fact revised upwards its GDP growth forecasts for 2024 and 2025, while inflation is now expected at 2.5% at the end of 2025, compared to 2.1% previously. The president of the issuing institute Jerome Powell also highlighted the uncertainties arising from the future Trump administration. The fact remains that this announcement from the Fed suggests an increase in short-term volatility on the markets, note the experts of the major Swiss bank.
It will be the turn of the Bank of England to meet this afternoon, where the status quo is expected. Also expected are the latest estimates of US GDP for the third quarter. Still on the macroeconomic news front, the German consumer is starting the coming year less pessimistic, while the country finds itself in the midst of political tumult awaiting the legislative elections scheduled for February 23. In Switzerland, exports fell last month, weighed down by chemicals and pharma, as well as the watchmaking sector.
Around 10:50 a.m., the SMI index fell by 1.51% to 11,462.8 points, the SLI lost 1.66% to 1895.2 points and the SPI dropped 1.40% to 15,291.04 points. None of the thirty main valuations was outside the red zone.
Swiss luxury stocks Richemont (-2.2%) and Swatch Group (-1.3%), suffered the decline in shipments of Swiss watches abroad in November, marked by a collapse of 27% towards the China and almost 19% to Hong Kong. The coming months will be crucial for the sector.
On the heavyweight side, Roche (-1.9%) drew the consequences of the failure of a phase IIb study on its pasinezumab treatment against Parkinson’s disease. Novartis (-0.3%) and, to a lesser extent, Nestlé (-0.1%) weighed somewhat on the index.
Zurich Insurance (-1.9%) saw its recommendation and price target lowered by UBS, due to high exposure to interest rates and its debt.
The bottom red went to VAT Group (-4.6%), followed by Partners Group (-3.9%) and ABB (-3.7%), without any particular news. Straumann was also running out of steam (-3.4%), while its price target was cut by Barclays.
In the broader market, software solutions provider Softwareone stood out (+8.5%) after announcing its merger with its Norwegian counterpart Crayon. Cumulative sales are expected at 1.6 billion francs.
For its part, the real estate company Novavest, merged since June with its counterpart Senioresidenz, lost a few feathers (-0.6%). The company announced earlier that it had managed to reduce the number of vacant homes in its portfolio. (AWP)
