Swiss stocks dropped for the third day in four, led by financial firms, after Germany and France split over how to end the region’s debt crisis before a summit of European leaders on Oct. 23.
Credit Suisse Group AG and Julius Baer Group Ltd. lost more than 2 percent, as the divide over the scope of the region’s bailout fund clouded the summit in Brussels. Actelion Ltd. sank 9.7 percent after the drugmaker forecast a sales decline next year.
The Swiss Market Index, a measure of the biggest and most actively traded companies, dropped 0.7 percent to 5,657.66 at the close in Zurich. The gauge climbed in the last three weeks as policy makers worked on a plan aimed at strengthening economies and banks and avert an expansion of the sovereign debt crisis. Even so, the measure has still tumbled 12 percent this year. The broader Swiss Performance Index slipped 0.9 percent today.
The European Financial Stability Facility may be able to offer loans to countries “before they face difficulties raising funds” in bond markets, draft guidelines show. The bailout fund may be authorized to provide credit lines amounting to as much as 10 percent of a country’s economy. Some German lawmakers criticized the plan, saying that would put an intolerable burden on taxpayers.
At the summit, “we expect important progress to be made, but the overall approach is likely to remain evolutionary rather than radical,” Darren Williams, a senior European economist at AllianceBernstein LP in London, wrote in a report today. “This may disappoint the exaggerated expectations now embedded in markets.”
A disagreement over the European Central Bank’s role threatens to stymie progress on a comprehensive strategy to end the crisis. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an impromptu meeting of European Union leaders in Frankfurt last night failed to resolve differences.
“Uncertainty reigns supreme as we contemplate the likely outcome of this weekend’s EU leaders summit with the rumor mill quite active,” Adrian Foster, a markets analyst at Rabobank Groep in Hong Kong, wrote in a report today.
The lack of clarity on the direction of talks led to a selloff in the bonds of so-called peripheral economies in Europe. The yield on Italian 10-year government bonds rose to more than 6 percent for the first time since Aug. 5.
Credit Suisse, the nation’s second-largest lender, fell 3.5 percent to 22.98 Swiss francs. Julius Baer, the Zurich-based private bank, declined 2.5 percent to 33.91 francs. Swiss Re AG, the world’s second-biggest reinsurer, lost 2.2 percent to 45.32 francs.
Meanwhile, Swiss investor confidence showed a negative reading for a sixth month in October, adding to signs of a deepening economic slowdown. An index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to minus 54.4 from minus 75.7 in September, the ZEW Center for European Economic Research in Mannheim, Germany, and Zurich-based Credit Suisse said today. A gauge of analysts’ assessment of the economic situation fell to 11.4 from 18.9 in September.
Actelion, Europe’s largest biotechnology company, plummeted 9.7 percent to 30.70 francs, its biggest retreat since March 2010. The volume of trading in its shares surged to four times the average in the last three months. The company said it expects drug sales to fall next year as it faces pricing pressure and increased competition in the U.S.
Roche Holding AG rose 0.5 percent to 143 francs. The drugmaker said a phase II study showed its ocrelizumab treatment maintained significant reduction in disease activity for multiple sclerosis patients for almost two years.