Swiss stocks tumbled the most in 2 1/2 years as the franc strengthened to a record against the euro amid concern that U.S. growth is slowing and speculation the world’s largest economy may lose its top credit rating.
Switzerland’s biggest banks led losses as UBS AG (UBSN) and Credit Suisse Group AG (CSGN) slid more than 7 percent. Straumann Holding AG (STMN), a dental implant maker, sank 4.8 percent and Lonza Group AG (LONN), a supplier to drug companies, retreated 7.2 percent. Clariant AG (CLN), the maker of pigments and emulsions, plunged 11 percent.
The Swiss Market Index (SMI), a measure of the largest and most actively traded companies, plunged 4.1 percent to 5,546.94 at the 5:30 p.m. close in Zurich. That’s the biggest decline since March 2009, the longest losing streak since 2003 and the lowest level in two years. The gauge has tumbled 17 percent from this year’s high on Feb. 18 on concern that Europe’s sovereign-debt crisis will spread from Greece to Italy and Spain. The broader Swiss Performance Index lost 4.1 percent today.
“The markets don’t approve of the debt-ceiling agreement yet,” said Manfred Hofer, senior investment analyst at LGT Capital Management AG in Pfaeffikon, Switzerland. “It can be assumed that the rating agencies will downgrade the AAA rating of the U.S. That puts a strain on the dollar and leads investors to the Swiss franc, which is considered a safe haven.”
The Swiss franc strengthened to 1.10 against the euro today for the first time since records began.
U.S. Debt Limit
The House of Representatives approved legislation yesterday to increase the U.S. debt limit by at least $2.1 trillion and cut spending by $2.4 trillion. Today was the Treasury Department’s deadline to lift the debt ceiling.
The deficit deal will add to a reduction in growth next year of 1.5 percentage points coming from the expiration of past stimulus programs, according to economists at JPMorgan Chase & Co. and Deutsche Bank Securities.
A report yesterday, when the Swiss equity market was closed for a holiday, showed manufacturing in the U.S. almost stalled in July. The Institute for Supply Management’s factory index slumped to 50.9, from 55.3 in June. Figures less than 50 signal contraction. Separate data last week showed that the U.S. economy grew less than forecast in the second quarter.
“Investors are especially anxious about the U.S. economy and fear the developments could affect corporate profits negatively,” Hofer said.
UBS, Credit Suisse
UBS plunged 7.7 percent to 12.10 francs, the biggest drop since May 2009.
Credit Suisse slumped 7.4 percent to 26.35 francs, the largest drop since January 2009. Teresa Nielsen, an analyst at Vontobel Holding AG, reduced her earnings-per-share estimate for the stock in 2012 to 3.69 francs from 4.05 francs, citing “weaker gross margin levels in wealth management and lower than previously expected investment bank revenue.”
Straumann tumbled 4.8 percent to 171 francs. “The rising Swiss franc is hurting the company’s margins, as well as macro concerns over strength of the U.S. economy,” said Thomas Deitz, an equity analyst at Royal Bank of Scotland Group Plc.
A gauge of European health-care companies fell 1.9 percent, the most since March. Lonza declined 7.2 percent to 62.40 francs, while Novartis AG (NOVN) slipped 4.5 percent to 46.31 francs. Sonova Holding AG (SOON), a hearing-aid maker, slid 5.8 percent to 70.25 francs.
Clariant slumped 11 percent to 11.13 francs, its lowest price since February 2010, leading the Stoxx 600 Chemicals Index to a decline of 2.5 percent. Syngenta AG (SYNN), the world’s biggest producer of crop-protection chemicals, retreated 6 percent to 237.90 francs. Givaudan SA (GIVN), the largest maker of flavors and fragrances, dropped 3.9 percent 830 francs.
Logitech International SA, the world’s biggest maker of computer mice, plunged 7.1 percent to 7.05 francs, its lowest price since January 2000.
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