Swiss stocks sank the most in more than two years amid increasing concern that the European debt crisis is spreading and as the Federal Reserve’s pledge to keep interest rates low failed to boost optimism in the economy.
Financial shares led losses, with UBS AG (UBSN) and Credit Suisse Group AG (CSGN), the nation’s biggest banks, sinking more than 3 percent. Adecco SA (ADEN), the world’s largest supplier of temporary workers, slumped the most in seven years. Holcim Ltd. (HOLN), the world’s second-biggest cement maker, fell 6.3 percent.
The Swiss Market Index (SMI), a measure of the biggest and most actively traded companies, declined 4.1 percent to 4,791.96 at the 5:30 p.m. close in Zurich. That’s the largest drop since March 2009. The gauge entered a bear market on Aug. 4 and has plummeted 29 percent from its high this year on Feb. 18 as Europe’s debt crisis and the slowing global economy prompted investors to buy the Swiss franc, reducing the value of exporters’ revenue. The broader Swiss Performance Index fell 3.8 percent today.
“We’re back to reality,” said John Plassard, director at Louis Capital Markets in Geneva. “As long as we don’t see an improvement in what I call the economic triptych -- the sovereign debt crisis, U.S. economic growth and Chinese inflation -- the markets won’t rally longer-term.”
The Fed yesterday said that officials “discussed the range of policy tools” to strengthen growth and are “prepared to employ these tools as appropriate” while pledging to keep the benchmark interest rate near zero until at least mid-2013.
“Keeping rates close to zero is a very strong signal, but it especially means that the economic outlook is not positive at all,” Plassard said.
The Federal Open Market Committee lowered its economic assessment, saying it now “expects a somewhat slower pace of recovery over the coming quarters.”
The Swiss central bank stepped up its fight to counter a surge in the franc today. The Swiss National Bank said that it will “significantly increase” the supply of liquidity to the money market and expand banks’ sight deposits to 120 billion francs ($166 billion) from 80 billion francs. It will also conduct foreign-exchange swap transactions to boost liquidity.
European bank shares tumbled the most in two years as the cost of insuring French debt rose to a record. UBS dropped 5.4 percent to 10.03 Swiss francs. Credit Suisse slid 3.5 percent to 21 francs, its lowest price since March 2003, while Julius Baer Group Ltd. (BAER), the 121-year-old wealth manager, sank 5.5 percent to 27.08 francs.
Adecco slumped 11 percent to 34.50 francs, the largest decrease since 2004, as the company said it would focus on cost control even after second-quarter net income rose to 141 million euros ($202 million) from 97 million euros a year earlier.
“I think this is more about what’s implicit in Adecco’s statement than what they actually said,” Teun Teeuwisse, an analyst at ABN Amro Bank NV who has a “hold” rating on the stock, said by telephone. “It focused a lot on costs and, in my view, that indicates that the outlook is not so strong.”
Holcim fell 6.3 percent to 43.44 francs as a gauge of European construction companies was among the worst performers of the 19 industry groups in the Stoxx Europe 600 Index. Geberit AG (GEBN), Europe’s biggest maker of toilet flushing systems, retreated 4.9 percent to 150.30 francs. Sika AG (SIK), Europe’s biggest maker of chemicals used in construction, plunged 6.8 percent to 1,528 francs.
Logitech International SA, the world’s biggest maker of computer mice, slid 6 percent to 5.99 francs, its lowest price since January 2000. Goldman Sachs Group Inc. analysts including Simon F. Schafer cut their price target for the stock to 7.50 francs from 11 francs, saying management outlook statements “suggest continued caution in consumer electronics-facing stocks” in the technology sector.
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