Swiss Stocks Drop Most in Five Weeks on Draghi WarningAdria Cimino
Swiss stocks retreated the most in more than five weeks as European Central Bank President Mario Draghi warned on risks to an economic recovery, after the ECB held its benchmark interest rate at a record low.
Cie. Financiere Richemont SA, Holcim Ltd and Givaudan SA led declining shares, falling at least 2.7 percent. Schmolz + Bickenbach AG jumped after saying Russian billionaire Viktor Vekselberg may take part in a capital increase.
The Swiss Market Index slid 1.4 percent to 7,762.65 at the close of trading in Zurich. The broader Swiss Performance Index also lost 1.4 percent. Shares dropped from a five-year high yesterday as a report showed U.S. service-industries growth missed forecasts. The number of stocks changing hands in the SMI was 8.6 percent lower than the average of the past 30 days, according to data compiled by Bloomberg.
“Draghi called into question economic growth,” said Yves Marcais, an equity sales trader at Global Equities in Paris. “That is the first element that weighed on the market.”
ECB officials meeting in Frankfurt today kept the benchmark rate at a record low of 0.75 percent, as forecast by 54 of 56 economists in a Bloomberg News survey. Two predicted a cut. In a press conference following the decision, Draghi said a recovery in the second half is subject to “downside risks,” including weaker growth and consumption. He also said the central bank couldn’t compensate for a lack of government action.
“There is a lot of pressure on the ECB and we don’t see what they can do,” said Amandine Gerard, president of Financiere de L’Arc in Aix-en-Provence, France, which oversees $205 million. “The market has only held up well because of all of the liquidity, with investments into equities by default.”
The Bank of England’s Monetary Policy Committee held its first meeting since U.K. Chancellor of the Exchequer George Osborne gave the bank more flexibility on hitting its 2 percent inflation target so it can aid the economy. The bank kept its key rate at a record low of 0.5 percent and maintained bond purchases at 375 billion pounds ($564 billion), matching economists’ estimates.
Richemont, the owner of the Cartier brand, fell 3.2 percent to 73.45 Swiss francs, declining for a second day.
Holcim, the world’s largest cement maker, slid 3 percent to 73.95 francs, as a gauge of construction stocks fell the second most of the 19 industry groups in the Stoxx Europe 600 Index.
Givaudan, the world’s biggest maker of flavorings and fragrances, declined 2.7 percent to 1,160 francs.
Swatch Group AG, the largest maker of Swiss watches, dropped 1.9 percent to 539.50 francs.
Schmolz & Bickenbach rose 10 percent to 2.60 francs, its biggest gain in more than two months, after the unprofitable Swiss steelmaker said Vekselberg may take part in a capital restructuring through his Renova Group investment company.
Renova, which is the largest shareholder in Swiss companies including textile machinery maker OC Oerlikon AG and pumpmaker Sulzer AG, has formed a group with the steelmaker’s main family shareholders and may participate in a capital restructuring, the Emmenbruecke-based company said in a statement today.