16 December 2016 – Swiss and global market roundup.
Brought to you by Investec Switzerland.
2016’s December rally continued this week as Swiss and European equities outperformed global stocks. The US dollar continued to surge after the Federal Reserve increased interest rates for only the second time in a decade on Wednesday.
Fed Head Janet Yellen told reporters that inflation expectations have risen ‘considerably’ on the back of Donald Trump’s election win in November but added that the economic outlook remained “highly uncertain.” Yellen said that the 0.25% increase of the key rate to 0.5% was only a “modest shift” and that the central bank expected to continue with only gradual rate increases in the short term.
The US dollar hit its highest levels in 13 years after the announcement, extending recent gains. US stocks fell and bond yields around the world rose. European markets rallied as investors expect exporters to benefit from weaker regional currencies.
In addition to the stronger dollar, diverging monetary policy on either side of the Atlantic made headlines again this week. While the Federal Reserve tightened monetary policy on Thursday, the Bank of England kept its key rate at a record low of 0.5%. The Swiss National Bank also left the deposit rate at minus 0.75 percent as it battles to keep the Swiss franc stable. This comes a week after the European Central Bank extended its quantitative easing programme until December 2017, citing the multitude of political uncertainties that Europe still faces.
In company news, Swiss recruitment firm Adecco led Swiss Market Index gains this week after it announced that it had spun off its Beeline staffing software business into a new company. Actelion Ltd was the week’s biggest SMI loser after US consumer conglomerate Johnson & Johnson abandoned its pursuit of the Swiss pharma company. It was later reported that the company may still be on the market with the company apparently now in talks with French drug giant Sanofi SA.