The Swiss stock market started trading on Thursday with a significant decline due to the recently released inflation figures.
In September, consumer price inflation in Switzerland slowed down, with year-on-year inflation rising by 0.8%, a decrease from 1.1% in August and 1.3% in July. This decline in inflation has raised concerns among investors, leading to a cautious market sentiment.
In the United States, Wall Street had mixed results the previous day, with major indices hovering around equilibrium. Positive employment indicators provided some support, but geopolitical uncertainties remained. Analysts, including John Plassard from Mirabaud Banque, noted that the better-than-expected employment statistics could influence the Federal Reserve's decision-making, potentially leading to a smaller rate cut of 25 basis points at the upcoming November meeting, rather than the previously anticipated 50 basis points.
As trading began, the Swiss Market Index (SMI) was down by 0.20%, settling at 12,098.86 points. The Swiss Leader Index (SLI) and the Swiss Performance Index (SPI) also recorded declines of 0.19% and 0.16%, respectively. Out of the thirty leading stocks, twenty-five were in the red, indicating a broad-based sell-off. Among the few gainers, Sandoz led with a 0.8% increase, followed by Novartis at 0.7% and Givaudan at 0.3%. Conversely, Zurich Insurance saw a slight decline of 0.1%, as the company prepares to unveil its financial targets for the 2025-2027 period in November. Kühne + Nagel, the logistics specialist, also faced a downturn of 0.6% after announcing the management of a new distribution center for Lego in Australia.
The recent inflation data has prompted economists to revise down their forecasts. Brian Mandt, Chief Economist at Lucerne Cantonal Bank, indicated that the inflation forecast for Switzerland has been revised down from 1.2% to 1.1% for the year. The Federal Statistical Office reported a month-on-month decrease in the consumer price index (CPI) of 0.3% for September, following stagnation in August and a contraction of 0.2% in July. Investment Director Jurus Arthur from ODDO BHF highlighted that the ongoing import deflation, which has reached -2.7%, is contributing to the increasing likelihood of a rate cut by the Swiss National Bank (SNB) in December 2024. This shift in inflation dynamics is significant, as it diverges from the SNB's expectations for the third quarter of 2024, raising questions about future monetary policy adjustments.
In the broader market, DKSH experienced a decline of 0.3% following the announcement of a new Food Services Test Kitchen in Malaysia. Dätwyler, a producer of polymer components, also saw a slight decrease of 0.1% as it prepares to propose the appointment of Britt Hendriksen to its Board of Directors at the upcoming Annual General Meeting in March 2025. Kudelski faced a more substantial drop of 1.8%, as its subsidiary Nagravision entered into a partnership with French firm Airties, which specializes in Wi-Fi services. This partnership aims to enhance Kudelski's offerings in the competitive tech landscape, but the immediate market reaction has been negative.
The overall sentiment in the Swiss stock market reflects a cautious approach among investors, driven by inflation concerns and the potential for shifts in monetary policy. Market participants will closely monitor both domestic and international developments that could influence future trading dynamics.