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 2 percent and 2.6 percent, respectively, following banking shares lower in Europe.
The Swiss Market Index fell 1.3 percent to 6,312.43 at the 5:30 p.m. close in Zurich, giving the first monthly loss in three months. The broader Swiss Performance Index retreated 1.2 percent 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.
Italian and Spanish government bonds fell, driving the extra yield investors demand to hold the securities instead of German bunds to euro-era records, as Europe’s debt crisis intensified. The cost of insuring debt for Italy, Spain, Portugal and Ireland surged to records and the euro slid.
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 2.2 percent to 54.55 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 2 percent to 15.03 francs and 2.6 percent to 37.04 francs. A gauge for European banking shares retreated for a third day.
Zurich Financial Services AG, Switzerland’s largest insurer, declined 2.2 percent to 223.3 francs.
Basilea Pharmaceutica AG declined 4.7 percent to 65.55 francs even after the company won a $130 million arbitration award from Johnson & Johnson in a dispute over the antibiotic ceftobiprole.