Swiss stocks retreated for a second day after the government cut its forecast for economic growth and a dispute over a group of islands in the East China Sea prompted Japanese companies to close their outlets in China.
Swatch Group AG slid 2.2 percent after UBS AG cut its recommendation on the biggest maker of Swiss watches. Transocean Ltd., the world’s largest offshore-rig contractor, lost 2.6 percent as oil dropped in New York. Nestle SA, which accounts for 25 percent of the Swiss Market Index, advanced 0.8 percent.
The SMI declined 0.2 percent to 6,537.1 at the close in Zurich, paring its rally from this year’s low on June 4 to 14 percent. The equity benchmark trades at 13.5 times the estimated earnings of its member companies, close to its highest valuation since 2009, according to data compiled by Bloomberg. The broader Swiss Performance Index slipped 0.4 percent today.
“Market participants are wary about growing tensions between China and Japan, Spain not asking for a European Central Bank bailout, and mixed ZEW surveys,” said Stephane Ekolo, chief European strategist at Market Securities in London. “All of these factors, as well as improved valuations, are weighing on the market.”
Switzerland’s gross domestic product will increase 1 percent this year instead of a previously projected 1.4 percent gain, the State Secretariat for Economic Affairs in Bern said today. The economy will expand 1.4 percent in 2013, according to the government’s group of experts. In June, they forecast growth of 1.5 percent.
Stocks around the world slipped as tensions between China and Japan continued. Toyota Motor Corp. and Nissan Motor Co. halted production at some plants in China, while Panasonic Corp. reported damage to its operations.
European Central Bank Governing Council member Luc Coene said rising bond yields may force Spain into asking for aid and submitting to the ECB’s conditions for granting it.
If “markets see that Spain will not” ask for assistance, “it will not last long before spreads will rise again, and then Spain will be somewhat forced to come back on its decision and submit to the conditionality program,” Coene said at a panel discussion in London yesterday.
Spain’s bond yields climbed past 6 percent yesterday for the first time since Sept. 7, the day after the Governing Council approved ECB President Mario Draghi’s plan to buy government debt. After falling to a five-month low of 5.55 percent on Sept. 10, the yield jumped to a high of as much as 6.01 percent yesterday.
The Spanish government sold 4.6 billion euros ($6 billion) of bills at an auction today, more than its maximum target.
A measure of German investor confidence rose for the first time in five months in September. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to minus 18.2 from minus 25.5 in August. Even so, ZEW’s gauge of the current situation fell to 12.6 from 18.2 in August.
Swatch, which gets 38 percent of its revenue from Greater China, lost 2.2 percent to 397 Swiss francs. UBS cut its recommendation to neutral from buy as the stock reached the analysts’ price forecast. The brokerage said it remained cautious on European luxury-goods companies.
Transocean, the owner of the oil rig that exploded in the Gulf of Mexico in April 2010, slid 2.6 percent to 41.93 francs. Oil extended its decline today after the biggest drop in almost two months amid speculation that a slowing U.S. economy will curb demand for crude.
Kuehne & Nagel International AG sank 2.5 percent to 111.10 francs. The world’s biggest sea-freight forwarder was cut to neutral from overweight at JPMorgan Chase & Co.
Baloise Holding AG slipped 1.6 percent to 75.05 francs as Bankhaus Metzler downgraded the insurance company’s shares to sell from buy.
Nestle, the world’s biggest food company, advanced 0.8 percent to 59 francs, limiting the SMI’s decline.
The volume of shares changing hands in SMI-listed companies was 18 percent higher than the average of the last 30 days, data compiled by Bloomberg showed.