SNB Lifts Rate By 25 Bps, Signals More Tightening
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The Swiss National Bank continued its policy tightening with yet another hike to its interest rates, but at a slower pace as expected, and signalled more such moves to counter the rising inflationary pressures. Switzerland's central bank hiked its policy rate by 25 basis points to 1.75 percent on Thursday. The new rate applies from June 23. This was the fifth straight rate hike. However, the bank slowed the pace of rate hikes from half a percentage point increase in both March this year and in December 2022, and by 75 basis points in September 2022. 'It cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term,' the bank repeated. The central bank reiterated that it remains willing to be active in the foreign exchange market as necessary. In the current situation, the bank said it is focused on selling foreign currency. Inflation declined notably in recent months due to the lower increase in prices of imported goods. Inflation hit a 15-month low of 2.2 percent in May. The SNB downgraded the inflation outlook for this year to 2.2 percent from 2.6 percent.
The Swiss stock market closed trading on Thursday marginally higher. The SMI gained 0.1 per cent to 11,183 points. Among the 20 SMI stocks, there were 12 price gainers and 8 price losers. 16.26 (previously: 17.38) million shares were traded. Among the individual stocks, Logitech rose by 2.9 per cent. The computer accessories manufacturer announced a new $1 billion share buyback programme. Shares of luxury company Richemont advanced 1.8 per cent. JP Morgan raised its price target for the stock to 190 francs (previously: 180) and reiterated its Overweight recommendation. The analysts expect Richemont to deliver another strong quarter. Among the index heavyweights, Nestle closed slightly 0.1 per cent firmer. Shares of pharmaceutical giant Roche rose 0.4 per cent, while Novartis shares fell 0.5 per cent. Meanwhile, UBS shares dropped 1.1 per cent. The Swiss National Bank (SNB) considers additional measures regarding bank regulation necessary after the crisis involving Credit Suisse.
On Thursday, the European stock markets recorded their fourth straight session in negative territory, as several central banks, led by the Bank of England, tightened their monetary policy. The Stoxx Europe 600 index fell by 0.5% to 454.7 points. In Paris, the CAC 40 and SBF 120 lost 0.8% each. The DAX 40 in Frankfurt was down 0.2% and the FTSE 100 in London shed 0.8%. Following the new monetary tightening announced in the morning by the Swiss and Norwegian central banks, the Bank of England (BOE) raised rates by 50 basis points, stepping up the pace of its monetary tightening in order to contain persistently high inflation in the UK. Luxembourg satellite operator SES (+7.8%) announced the end of merger negotiations with its US competitor Intelsat. Casino (-3.8%) used various instruments to preserve its liquidity. Analysts at Oddo BHF have lowered their earnings forecasts for mining group Eramet (-2.7%) for 2023. Trading of SES-imagotag shares was suspended at midday following a request from the company, pending the publication of a press release. The electronic labels specialist is the target of an activist offensive, with the funds Gotham City Research and General Industrial Partners (GIP) issuing a series of suspicions and accusations relating in particular to SES-imagotag's accounting. Ocado shares soared 32.1% on the London Stock Exchange in response to speculation about a possible takeover of the British online retailer.
U.S. stocks climbed Thursday, with gains in shares of technology and consumer discretionary companies helping the S&P 500 snap a three-session losing streak. The S&P 500 rose 0.4%, while the Dow Jones Industrial Average slipped nearly 5 points, or less than 0.1%, and the Nasdaq Composite added 1%. Big technology stocks outperformed. Amazon.com jumped 4.3% to $130.15, erasing losses from Wednesday, when the Federal Trade Commission said it was suing the retail giant over accusations it enrolled consumers without consent into its Amazon Prime program. Tesla rose 2% to $264.61. Shares of technology-driven companies have been among the best performers in the broad market this year, a reflection of investors’ preference in 2023 for betting on growth. Bank stocks slid. Powell said in his testimony that the Fed was working with lenders it identified as being particularly exposed to the recent slump in commercial real estate. Record office vacancy rates, caused in part by rising demand among workers for remote work, has caused a number of office-building owners to default on their mortgages. The KBW Bank Index fell 2.3%. Real-estate investment trusts also declined. Simon Property Group, the largest owner of shopping malls in the U.S., ended the day down 1.5%. Overstock.com shares soared 17% after the company successfully bid on Bed Bath & Beyond’s assets for $21.5 million. The latter retailer filed for bankruptcy in April, following a steep decline in its stock price that stymied its efforts to raise capital.
Asian stock markets are mostly lower on Friday, following the broadly negative cues from global markets overnight, as traders react to interest rate hikes by the Bank of England, the Norges Bank and the Swiss National Bank as well as inflation concerns that triggered growth worries. The benchmark Nikkei 225 Index closed the morning session at 32.624,99, down 1.9 percent. Among other major losers, Mitsui & Co. losing almost 5 percent, while BANDAI Fujikura and Mitsubishi Corp. are down more than 4 percent each. Ebara, Itochu, Trend Micro, Mitsubishi Heavy Industries, IHI and Sojitz are declining almost 4 percent each, while Marubeni, Kobe Steel, Sumitomo Metal Mining, Sumitomo and CyberAgent are slipping more than 3 percent each. Conversely, Tokyo Electric Power is surging almost 6 percent. Elsewhere in Asia, Hong Kong is down 1.8 percent, while South Korea sheds 0.9 percent. China remains closed for the Dragon Boat Festival.
The policy-sensitive 2-year U.S. Treasury yield led a rise in rates on Thursday as global central banks delivered a flurry of interest-rate increases, including a larger-than-expected hike by the Bank of England, to curb inflation. The 10-year U.S. Treasury note yield rose by 7 basis points to 3.797%. The 2-year U.S. Treasury note yield climbed by 8 basis points to 4.787%.
Accelleron target price: Goldman Sachs upgrades to CHF 24.70 (23.80) - Neutral
Richemont target price: JPMorgan raises to 190 (180) CHF - Overweigh
Target price Sika: Jefferies lifts to 328 (316) CHF - Buy
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