14 October 2016 – Swiss and global market roundup.
Brought to you by Investec Switzerland.
The Swiss Market Index is set to finish the week lower, but outperforming global stocks, thanks to a strong week of luxury good stocks.
Global stocks fell to their lowest levels since July on Thursday as investors rushed to the safety of government bonds, yen and gold after renewed concerns over weakness in the Chinese economy and as the Federal Reserve considers raising interest rates. Data showed that Chinese exports fell the most since February amid weak global demand, while imports also declined. The figures came after minutes released yesterday of the Fed’s previous meeting showed policy makers see no reason to hold back on a December rate hike. Investor sentiment received another hit as investors saw one of the worst starts to an earnings season for stocks since the bull market began seven years ago and experienced additional concerns over the stability of the UK. Consequently, investors see little reason to take added risks in current market environment with major negative catalysts.
In Switzerland, officials in Brussels and Bern are still trying to come to an agreement on immigration as reports surface that the European Union has concerns about a workaround the Swiss had pinned their hopes on. The two sides have been at pains to find a compromise after Switzerland voted in a 2014 plebiscite to re-introduce quotas for newcomers from EU countries after having allowed them for years to take up jobs and residence in the country. Fearing damage to the economy, Swiss lawmakers have come up with a “light” proposal that sidesteps quotas in favor of a requirement that job vacancies be listed at unemployment offices. The EU and Switzerland agreed to continue looking for a solution acceptable to both sides and to meet again at the end of October.
In economic data, the seasonally adjusted unemployment rate in Switzerland remained unchanged at 3.3% during September, although there was a small increase in the unadjusted total number of unemployed on the month. Moreover, latest data will tend to reduce fears concerning the economy, although data will continue to be monitored closely by the Swiss National Bank (SNB) with the bank still calling for a weaker currency over the medium term.
This week, Swatch and Richemont advanced significantly despite weak overall market sentiment. Swatch benefitted from several analyst comments, offering a more optimistic view than previously. This came in just after LVMH, reported better-than-expected sales for the third quarter and the first nine months of the year on Tuesday, leading to buying activity in peers such as Richemont.