30 September 2016 – Swiss and global market roundup.
Brought to you by Investec Switzerland.
The Swiss Market Index is set to finish the week notably lower, underperforming global stocks, as financial sector stocks sell off on questions over Deutsche Bank’s solvency.
Global equities edged lower this week with European financials among the biggest losers after the share price of Deutsche Bank hit a 30 year low on mounting concerns about the survival of the struggling German lender. Investors dumped Deutsche Bank’s stock on worries that the financial giants capital position will be overburdened by a $14 billion fine imposed by US authorities for the banks role in misspelling mortgage-securities a decade ago. Although analysts insist that this is no Lehman Brothers situation, fears that Deutsche Bank’s troubles will spill over into other big-name European banks and threaten the whole region’s financial system have led to major sell offs across the financial sector.
The price of oil rallied on Thursday after OPEC members struck a deal to limit crude output for the first time since 2008. The deal is an attempt to ease a global glut that has halved crude oil prices in the past two years. The group of leading oil producing countries agreed to limit production to between 32.5m and 33m barrels per day. It is a small reduction of the current 33.24m barrels per day output and was agreed at informal talks at an industry event in Algiers on Wednesday. Brent crude oil initially rose to just over $49 a barrel on Thursday morning and energy shares were among the strongest weekly performers.
In other economic news, the US economy expanded more in the second quarter than previously estimated. Gross domestic product rose at a 1.4% annualized rate, compared with a prior estimate of 1.1%. US households are doing the heavy lifting for the economy, making up for tepid business investment and lackluster demand from overseas.
In Switzerland reports showed that domestic consumption climbed in August on the back of a resurgence in tourism and above-average car sales. Meanwhile, employment increased modestly from the previous quarter but fell compared with the previous year. The Swiss economy grew 1% in the first half of the year.
This week financials were among the biggest losers with Credit Suisse, UBS and Julius Baer all falling on Deutsche Banks woes. Speculation amongst market players that Germany’s biggest bank could need a state rescue has led investors to sell stocks across the whole financial sector.