7 October 2016 – Swiss and global market roundup.
Brought to you by Investec Switzerland.
The Swiss Market Index is set to finish the week mainly unchanged, outperforming global stocks modestly while markets fluctuated on speculation that the US Fed will increase interest-rate later this year.
Global equity markets oscillated this week while the dollar strengthened, reflecting renewed investor concerns that the US Federal Reserve would raise interest rates by year’s end. On Monday, Fed Bank of Cleveland President Loretta Mester said she expects the case for a hike to remain “compelling” at the next review in November and it sees the US economy resilient enough to withstand an increase in interest rates. Investor sentiment was also hit after European Central Bank officials said that that the ECB could start winding down its quantitative-easing program, in steps of 10 billion euros ($11.2 billion) per month, significantly ahead of schedule.
Financials recovered from last week’s sell-off as concerns about Deutsche Bank AG’s finances eased after the lender was reported to be lining up a less-costly settlement with US regulators than investors had feared. Deutsche Bank AG’s Chief Executive Officer John Cryan further shored up confidence with the beleaguered lender while analysts signaled trust in the bank’s ability to withstand client withdrawals. Markets were also supported by a firmer oil price after federal data showed that US crude stockpiles fell for the fifth consecutive week.
In Swiss economic data, consumer prices increased less than expected in September, rising 0.1% month-over-month, while on a year-over-year basis, the inflation gauge contracted 0.2%, well below median forecast of 0.0%. The lower reading is mainly due to the downside pressure of transport and personal goods. Swiss retail sales were also released this week and showed a 3% decline on a year-over-year basis in August. After a slightly stronger than expected release for July, the latest data could trigger fresh concerns surrounding the outlook for consumer spending with consistent annual sales declines over the past 12 months. Although again there are still some concerns over underlying weakness in spending, especially as overseas visits for Swiss residents appeared to have held firm.
This week, financials were among the biggest winners with Credit Suisse, UBS and Julius Baer all gaining on Deutsche Bank’s stabilisation and anticipation of higher interest rates in the US.