Swiss stocks advanced to a one-month high as the government raised its forecast for economic growth this year, outweighing a surge in Spain’s benchmark bond yield to a euro-era record.
Basilea Pharmaceutica (BSLN) AG rallied to a five-week high after GlaxoSmithKline Plc agreed to buy its Toctino hand eczema drug. Julius Baer Group Ltd. (BAER), the Swiss wealth manager founded in 1890, jumped after UBS AG recommended buying the stock.
The Swiss Market Index (SMI) added 0.8 percent to 5,919.88 at the close in Zurich, its highest since May 11. The benchmark gauge has still dropped 6.7 percent from its 2012 high on March 16 amid mounting concern that Greece will have to leave the euro currency union. The Swiss Performance Index rose 0.6 percent today.
“There is a lot that has been discounted in European equity markets in terms of the region’s debt crisis,” said Fernando Espinosa, a trader at Interbrokers Espanola in Barcelona, Spain. “Investors have driven stocks to very low levels and hence valuations have been adjusted to very attractive levels.”
The government’s expert group raised its growth forecast for this year on domestic demand. Swiss gross domestic product will rise 1.4 percent in 2012 instead of a previously projected 0.8 percent, the State Secretariat for Economic Affairs said. In 2013, the economy may expand 1.5 percent, compared with a March forecast of 1.8 percent.
Household spending will rise 1.7 percent this year and 1.3 percent in 2013. Exports will increase 1.4 percent and 4 percent, respectively.
Spanish Borrowing Costs
Swiss stocks briefly pared their advance and European government bonds fell after Fitch said euro-area countries face lower ratings because policy makers are failing to demonstrate they can bring the debt crisis under control.
Spanish 10-year yields rose to the most in the history of the currency bloc after Fitch said the nation will “significantly” miss its budget deficit targets. The rate on Italian 10-year securities jumped to the most since January as the country prepared to sell bonds on June 14.
Ratings in the currency bloc are under “strong downward pressure,” Fitch Managing Director Ed Parker said at an event in Oslo. If there’s “no light at the end of the tunnel soon,” the risk of a breakup of the 17-member euro area will rise, he said.
Separately, Fitch cut 18 Spanish banks’ long-term issuer default ratings and 15 banks’ viability ratings. Spain was offered 100 billion euros ($126 billion) in loans by euro-area governments last weekend to rescue its banks.
“The bank bailout offer was a necessary step, but it also brought more questions than answers,” said Philippe Gijsels, a market research analyst at BNP Paribas Fortis Capital Markets in Brussels. “Something had to be done. But unfortunately it doesn’t solve all the problems and it wasn’t positive enough to turn everything around.”
Basilea Pharmaceutica rallied 4 percent to 46 Swiss francs, the highest since May 3. GlaxoSmithKline Plc agreed to buy marketing rights for Toctino for 146 million pounds ($226 million).
Glaxo’s Stiefel unit will pay as much as 50 million pounds more if the drug reaches certain goals, and “double-digit” royalties on U.S. sales three years after the product’s approval there, Basilea said in a statement late yesterday.
Roche, Julius Baer
Roche Holding AG (ROG), the world’s largest maker of cancer drugs, rose 1.6 percent to 156.20 francs and Nestle SA (NESN), the maker of Nespresso coffee and Stouffer’s frozen meals, gained 1.3 percent to 55.50 francs. The two companies make up about 40 percent of the SMI.
Julius Baer climbed 2.7 percent to 32.54 francs after UBS AG raised its recommendation on the company’s shares to buy from neutral. The brokerage said the asset manager’s balance sheet is not at risk from the debt crisis. The shares dropped 14 percent in 2012 before the upgrade.
Swatch (UHR), the world’s largest watchmaker, dropped 2 percent to 364.40 francs and Richemont, the owner of the Cartier brand, fell 0.3 percent to 53.50 francs, paring earlier losses of as much as 2.4 percent.
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