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Swiss Stocks Drop on Europe Debt Concern; Credit Suisse, Julius Baer Fall

Swiss stocks fell, paring a third- quarter advance, as better-than-expected U.S. economic data failed to alleviate concern that Europe’s sovereign-debt crisis may worsen.

Credit Suisse Group AG fell 2.2 percent and Julius Baer Group Ltd. dropped 2.5 percent as Ireland bailed out another lender and estimated the cost of rescuing its banks may rise to as much as 50 billion euros ($68 billion). Roche Holding AG, the world’s biggest maker of cancer drugs, and Swatch Group AG, the maker of Omega and Breguet watches, helped limit losses after analysts advised buying both shares.

The benchmark Swiss Market Index of the biggest and most actively traded companies decreased 0.2 percent to 6,296.33 at the 5:30 p.m. close in Zurich, paring the gain this quarter to 2.8 percent. The broader Swiss Performance Index also dropped 0.2 percent today.

The SMI has dropped 9.6 percent from this year’s high on April 15 as concern re-emerged that a sovereign-debt crisis in Europe will crimp economic growth and hurt the value of government bond holdings at banks. The index has traded in a range of 6,047.16 and 6,503.12 since mid-July as investors assess the strength of the global economic recovery.

“Our clients in the indices continue to sell any move higher and buy any selloffs,” said Simon Denham, chief executive officer of London Capital Group Holdings Plc in London. “At some point they will get it wrong as a break-out occurs but for the time being ‘the range,’ it appears, is the game to play.”

U.S. GDP

The SMI rebounded briefly as the U.S. government revised an increase in gross domestic product that was more than the median forecast of economists surveyed by Bloomberg News. The world’s largest economy grew 3.7 percent in the first three months of the year and 5 percent at the end of 2009.

Initial jobless claims in the U.S. decreased by 16,000 to 453,000 in the week ended Sept. 25, lower than the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The total number of people receiving unemployment insurance and those getting extended payments fell.

Credit Suisse, the second-biggest Swiss bank by assets, fell 2.2 percent to 42 francs. Julius Baer, the 120-year-old Swiss private bank, slipped 2.5 percent to 35.77 francs, its fourth loss.

Ireland’s government is preparing to take majority control of Allied Irish Banks Plc and pump extra cash into Anglo Irish Bank Corp. to draw a line under its financial crisis, the government said today.

Irish Banks

The total cost of bailing out the country’s banks may ultimately rise to about 50 billion euros, under a “stress case” scenario for Anglo Irish, according to figures published by the country’s finance ministry and the central bank in Dublin today. The base case estimate is 45 billion euros, the figures show. Allied Irish may need as much as 3 billion euros.

“Ireland have been forced to prop up their banks again as the debt from their huge property companies goes ever more sour,” said London Capital’s Denham said, “and the chances of property values rallying to the extent of extracting them from the mire seem very low.”

Roche, which has lost 24 percent this year, rose 2.1 percent to 134.2 francs.

“Roche is now trading at a discount of 12 percent to its peers on the back of a surprisingly large number of pipeline setbacks,” DZ Bank AG wrote in a report today. “Our view is therefore that the market is overly negative about the outlook for Roche.”

Swatch climbed 1.9 percent to 369.7 francs. Sanford C. Bernstein & Co. analyst Luca Solca upgraded the shares to “outperform” from “market perform,” citing increasing sales in China and more broadly from Asia.

Gategroup, Cosmo

Gategroup Holding AG slumped 8.1 percent to 39 francs. The provider of airline services said it plans to raise about 200 million Swiss francs in a share sale. The rights offer is expected to start after approval of a general shareholders meeting on Oct. 26, the company said.

Cosmo Pharmaceuticals SpA jumped 15 percent to 18 francs. The Italian developer of treatments for digestive-tract infections said tests on its developing treatment for ulcerative colitis posted positive results.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Adam Ewing in Stockholm at aewing5@bloomberg.net.

To contact the editor responsible for this story: David Merritt at merritt1@bloomberg.net.

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