Swiss stocks fell for a third day as Credit Suisse Group AG downgraded Nestle SA and the bailout of Ireland failed to reassure investors that the region will contain its sovereign-debt crisis.
Nestle dropped as Credit Suisse cut its rating on the world’s largest food company to “neutral” from “outperform.” UBS AG and Credit Suisse declined 1.3 percent and 0.7 percent, respectively, following banking shares lower in Europe. Transocean Ltd. rose before the Swiss-listed shares of the offshore drilling contractor are added to the MSCI Switzerland Index after the closing of the market today.
“The market could drop further,” Enrico Racioppi, a London-based banking analyst at Hammer Partners, wrote in a note today. Losses on bonds from Portugal, Ireland and Greece and further deterioration of Spain and Italy “are not priced” in, he wrote.
The extra yield investors demand to hold 10-year Italian debt instead of benchmark German bunds widened to more than 200 basis points for the first time since the euro’s debut in 1999. Meanwhile, the difference in the cost of insuring subordinated and senior European financial-company bonds rose to the most since May 2009.
A Swiss gauge of consumer demand rose in October as declining unemployment prompted households to step up spending.
UBS’s consumption indicator increased to 1.72 in October from 1.70 in the previous month, the Zurich-based bank said in an e-mailed statement today. The gain “can be attributed primarily to an improvement in business activity in the retail sector as well as growing new car registrations,” it said.
“Even if it remains below its third-quarter levels, it does not confirm the sharp drop in confidence measured by the Ministry of Economic Affairs earlier this month,” Julien Manceaux, an economist at ING Group in Brussels, wrote in an e- mailed comment. “Even if growth prospects are softer for 2011, the current rhythm of recovery may still trigger an SNB rate hike in the first half of next year.”
Nestle declined 1.2 percent to 55.1 francs. Credit Suisse cut its rating to “neutral” from “outperform.” The brokerage highlighted in a note that the company has been “a very strong performer for six years now. On a 15 percent premium to its immediate U.S. and European peers and little short term EPS growth, it may be time to draw breath.”
UBS and Credit Suisse, Switzerland’s biggest banks, declined 1.3 percent to 15.13 francs and 0.7 percent to 37.76 francs. A gauge for European banking shares retreated for a third day.
Zurich Financial Services AG, Switzerland’s largest insurer, declined 1.4 percent to 225.3 francs.
Basilea Pharmaceutica AG declined 2.4 percent to 67.1 francs even after the company won a $130 million arbitration award from Johnson & Johnson in a dispute over the antibiotic ceftobiprole.
Transocean was the best performer on the Swiss Market Index, increasing 2.1 percent to 69.15 francs.
Transocean’s shares will be included in the MSCI Switzerland from today’s close, while the company’s New York- listed stock will be deleted from the MSCI USA Index, according to a statement from the index provider on Nov. 10.
“Today we have the semi-annual MSCI rebalance which sees turnover of around $5.8 billion in Europe, of which over $3 billion is in 11 adds and 9 deletes,” Nomura Holdings Inc. said in a note. Nomura mentioned among the largest changes by value “the repatriation of Transocean from the U.S. to Switzerland.”
Tecan Group AG increased 2.6 percent to 71.3 francs. Berenberg Bank reiterated a “buy” rating on the maker of liquid sample processors used in the drug industry after the company said it signed a “major” manufacturing agreement.
“We believe the market continues to under-appreciate the growth potential of Tecan’s OEM business,” the brokerage said in a note.
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