Swiss stocks dropped to a six-week low as concern grew that the Federal Reserve will scale back its stimulus in September and as two U.S. central bankers reiterated their support for reducing bond purchases.
Swiss Re Ltd. paced a decline in financial shares. Holcim Ltd. followed European construction-related companies lower.
The Swiss Market Index fell 1.6 percent to 7,747.84 in Zurich. The SMI has retreated in the past two weeks as investors speculated that an improving economy will lead to a paring of stimulus measures. The broader Swiss Performance Index also slid 1.6 percent today.
“Economic indicators will be closely watched to see if we’re in a recovery process or not,” said Yves Marcais, an equity sales trader at Global Equities in Paris. “We’ve had a significant rally. When we start talking monetary policy, the market worries. I’m not confident for the next few weeks.”
A report from the ADP Research Institute today showed U.S. companies increased employment by 135,000 workers in May. The median forecast of 40 economists surveyed by Bloomberg called for an advance of 165,000. The official monthly nonfarm-payrolls data will be released on June 7.
The Fed will probably trim its monthly asset purchases by almost a third in September if the labor market continues to strengthen, Joseph LaVorgna, Deutsche Bank AG’s chief U.S. economist, wrote yesterday in a note to clients.
The first reduction will be $25 billion, consisting of $10 billion fewer mortgages and $15 billion of Treasuries. This will bring monthly purchases down to $60 billion from the current level of $85 billion, LaVorgna predicted.
Fed Bank of Kansas City President Esther George, who has dissented against record stimulus at every policy meeting this year, and Fed Bank of Dallas President Richard Fisher called for a reduction in monetary support.
“Waiting too long to acknowledge the economy’s progress and prepare markets for more normal policy settings carries no less risk than tightening too soon,” George said in the text of a speech. She didn’t speak because of illness.
Swiss Re, the world’s second-biggest reinsurer, fell 2.4 percent to 67.95 Swiss francs. Zurich Insurance Group AG dropped 1.5 percent to 248 Swiss francs, its lowest price since April 22.
UBS AG, Switzerland’s largest bank, lost 2.3 percent to 16.69 francs. Credit Suisse Group AG retreated 2.4 percent to 27.56 francs.
Holcim, the world’s biggest cement maker, slipped 1.6 percent to 72.50 francs. European construction-industry shares were among the worst-performing groups in the Stoxx Europe 600 Index.