Switzerland Stocks Decline as U.S. Budget Talks Continue

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Swiss stocks fell for a third day as uncertainty over continued discussions on a new U.S. budget to avoid the so-called fiscal cliff offset a report showing Chinese manufacturing expanded at a faster-than-expected pace.

Actelion Ltd. posted the biggest decline on the benchmark Swiss Market Index, falling 2.9 percent. Swatch Group AG added 3.8 percent after Morgan Stanley upgraded its recommendation on the shares.

The SMI retreated 0.3 percent to 6,902.51 at the close of trading in Zurich, for a 0.3 weekly decline. The gauge has still advanced 21 percent from this year’s low on June 4 as European Central Bank policy makers agreed on an unlimited bond-buying plan and the Federal Reserve announced a third round of quantitative easing. The broader Swiss Performance Index fell 0.2 percent today.

“This morning’s HSBC PMI report on Chinese manufacturing is very important news, but the market is only concentrating on this fiscal cliff,” said John Plassard, vice president at Mirabaud Securities LLP in Geneva. “Also, Morgan Stanley upgraded Swatch, so that should be a trigger for the market to go up because it was something really positive but the market is holding its breath before a resolution to the fiscal cliff.”

In the U.S., President Barack Obama and House Speaker John Boehner met yesterday to discuss averting more than $600 billion of spending cuts and tax increases before an end-of-year deadline, with no public announcement of progress.

The president and congressional Democrats have said they won’t discuss spending cuts unless Republicans agree to higher tax rates for top earners. Republicans have insisted on reductions to entitlement programs such as Medicare.

Chinese Output

In China, a report showed manufacturing in the world’s second-biggest economy may expand at a faster pace this month. The December preliminary reading was 50.9 for a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics. That compares with the 50.8 median projection in a Bloomberg News survey.

In the euro area, a preliminary report showed that a measure of manufacturing climbed to 46.3 in December, up from 46.2 in the previous month. A composite index that also includes services jumped to 47.3 this month, the highest since March, from 46.5 in November. A reading below 50 means contraction.

Actelion, Switzerland’s largest biotechnology company, fell for a fourth day, losing 2.9 percent to 44.99 Swiss francs. The company said it expects the Food and Drug Administration’s review of Macitentan, its treatment for pulmonary arterial hypertension, to last 12 months.

Insurer Difficulty

Swiss Re AG, the world’s second-biggest reinsurer, slid 1.3 percent to 65.35 francs, falling for a third day.

European insurers and pension funds could run into difficulties because of low interest rates and fragile financial markets, the industry’s top regulator said in a report today.

“Weak economic prospects, grown economic imbalances and the likelihood of a prolonged low interest-rate environment create a significantly negative medium term outlook for the financial soundness of the European insurance and occupational pensions sectors,” the Frankfurt-based European Insurance and Occupational Pensions Authority said.

Credit Suisse Group AG, Switzerland’s second-largest bank, dropped 1 percent to 22.65 francs.

Swatch, the world’s biggest watchmaker, advanced 3.8 percent to 464.8 francs, its highest price in more than 19 years. Morgan Stanley upgraded the stock to overweight, the equivalent of buy, from underweight, citing potential gains from an improvement in the Chinese luxury goods market.

Cie. Financiere Richemont SA, the second-largest luxury-goods company, added 0.9 percent to 72.10 francs, rallying after three days of losses.

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