Swiss stocks dropped as concern re-emerged that some European governments will struggle to rein in their nations’ debt. UBS AG (UBSN) and Credit Suisse Group AG (CSGN), Switzerland’s largest banks, paced the retreat.
Clariant (CLN) AG, the world’s biggest maker of printing-ink chemicals, gained 3.5 percent after reporting higher sales.
The Swiss Market Index (SMI) of the biggest and most actively traded companies dropped 0.4 percent to 6,512.99 at the 5:31 p.m. close in Zurich. The broader Swiss Performance Index (SPI) lost 0.4 percent to 5,791.91.
While the U.S. Federal Reserve today may introduce a second round of monetary easing to stimulate growth, German Finance Minister Wolfgang Schaeuble said the euro’s stability depends on making investors pay for future debt crises. The cost of insuring Irish sovereign debt surged to a record and Greek and Portuguese bonds tumbled.
“There are concerns again,” said Luis Benguerel, a trader at Interbrokers Espanola de Valores in Barcelona. “The bond market is telling you some problems in Europe’s economies are far from over. While the Fed will go out full mode to help the economy, Europe is not reacting.”
The SMI dropped as much as 9 percent between April and July on concern countries including Greece and Ireland will find it hard to cut their budget deficits while austerity measures will hurt economic growth in Europe.
The Fed will probably introduce a second round of unconventional monetary easing today by announcing a plan to buy at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News. Speculation the central bank will pledge more money to protect an economic rebound has helped stocks worldwide and lifted the SMI by 9.6 percent since July 5.
“First, they would like to ratify and extend the rally in financial conditions,” Michael Hanson, New York-based economist at BofA Merrill Lynch Global Research, wrote in a report today. “Second, Fed officials want to stabilize inflation closer to their implicit 2 percent inflation objective. Both of these policy goals suggest that the Fed will need to purchase enough assets to get a positive market reaction, and to provide some forward guidance about policy to continue the rally.”
Credit Suisse Group AG and UBS AG, Switzerland’s two largest banks, dropped 1.2 percent to 40.75 francs and 0.9 percent to 16.69 francs, respectively.
Clariant rose 3.5 percent to 17.25 francs. The Swiss supplier of detergent ingredients, color concentrates and pigments said third-quarter sales jumped 8 percent in local currencies and increased 14 percent over the year’s first nine months. Clariant said it expects “high single digit” sales growth in local currencies for the full year.
Third-quarter earnings increased 70 percent to 182 million francs ($185 million), beating a 177 million-franc estimate from Bank of America Merrill Lynch analyst Andrew Stott. Cie. Financiere Richemont SA (CFR), Switzerland’s largest jewelry maker, gained 2.6 percent to 51.45 francs, a fifth gain. The shares were raised to “outperform” from “underperform” at CA Cheuvreux.
To contact the reporter on this story: Alexis Xydias in London at firstname.lastname@example.org.