Swiss Stocks Rally to Highest Level Since May After FedInyoung Hwang
Swiss stocks rallied to their highest level since May after the Federal Reserve unexpectedly refrained from slowing the pace of its monthly bond purchases.
Holcim Ltd. climbed 3.7 percent for the best performance on the Swiss Market Index. Swatch Group AG and Cie. Financiere Richemont SA gained more than 1.7 percent after a report showed that Swiss watch exports rose in August. Syngenta AG added 1.5 percent after announcing a plan to increase the productivity of the most important crop breeds by 20 percent.
The SMI added 0.5 percent to 8,092.29 at the close in Zurich. The broader Swiss Performance Index also climbed 0.5 percent today. The volume of shares changing hands in SMI-listed companies was 45 percent greater than the average of the past 30 days, according to data compiled by Bloomberg.
“Tapering was just one of many risk hurdles that we needed to clear -- or not clear -- in September,” Alex Neil, the head of equity and derivatives trading at EFG Bank in Geneva, said in an interview. “I wouldn’t be surprised to see markets drift north in the short term.”
The Fed yesterday refrained from reducing its $85 billion of monthly asset purchases, saying it needs to see more evidence of lasting improvement in the U.S. economy. Of 64 economists surveyed by Bloomberg before the decision, 44 predicted that the central bank would decide to start slowing its bond buying.
Bernanke reiterated that any decision to slow the pace of asset purchases would depend on economic data, rather than a timetable. Policy makers repeated their guidance that the Fed’s target interest rate will remain low at least as long as unemployment exceeds 6.5 percent, and the outlook for inflation fails to climb above 2.5 percent.
“Conditions in the job market today are still far from what all of us would like to see,” Fed Chairman Ben S. Bernanke said at a press conference in Washington after European markets closed. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”
The SMI has gained 4.5 percent so far this month, extending its rally this year to 19 percent, as central banks pledged to leave interest rates low for a prolonged period.
“The Fed has lost a lot of credibility today,” EFG’s Neil said. “The whole market was expecting a taper, so why not just get it out of the way and take the first step to policy normalization? This drawing out may end up hurting us in the long run, as investors worry about the unwanted side effects of such experimental policies.”
Switzerland’s gross domestic product will increase 1.8 percent this year, according to the State Secretariat for Economic Affairs in Bern. SECO’s group of experts predicted growth of 1.4 percent when it last published a forecast in June. They raised their estimate for expansion in 2014 to 2.3 percent from 2.1 percent.
Holcim, the world’s largest cement maker, climbed 3.7 percent to 70.20 Swiss francs. A gauge of construction and materials companies on the Stoxx Europe 600 Index advanced 1.2 percent as investors bought shares tied to economic growth.
Swatch, the biggest maker of Swiss watches, climbed 1.7 percent to 596.50 francs, while Richemont, which owns the Cartier brand, gained 2.1 percent to 94.60 francs. Swiss watch exports rose 0.5 percent in August from a year ago, according to the Federation of the Swiss Watch Industry.
Syngenta added 1.5 percent to 376.60 francs. The world’s largest maker of crop chemicals announced an initiative to find ways of increasing the productivity of major crops by 2020 without using more land or water.