Prolonged Slump Persists in Swiss Stock Market Performance
Swiss stocks took a dive again on Thursday, with the entire session spent in the red and mirroring the downward trend of major European markets. The Swiss Market Index (SMI) has plummeted in five consecutive sessions, shedding over 450 points or 3.8% in total.
The escalating conflict between Israel and Iran has shaken investor confidence as a prominent hospital in southern Israeli was severely damaged, and reports of injuries flood in following a series of Iranian missile attacks. Israel has threatened retaliation, promising to ramp up strikes.
For the day, the index lost 87.95 points or 0.74% to close at 11,871.52, trading between 11,830.12 and 11,931.12.
Notable common stocks that witnessed a fall include Adecco Group, which dropped by 4.79%; Compagnie Financière Richemont, down by 2.65%; UBS Group, retreating by 1.79%; Nestle, sliding by 0.92%; ABB, decreasing by 0.89%; Julius Bar Gruppe, sinking by 0.54%; Swisscom, losing 0.53%; Zurich Insurance, falling 0.43%; Roche Holding, inching up by 0.35%; Swiss Re, sliding by 0.33%; Novartis, adding 0.25%; and Swiss Life, easing by 0.15%.
In economic news, the Swiss National Bank (SNB) lowered its policy rate by a quarter-point, citing decreased inflationary pressures. The rate was now brought down to 0%, marking the sixth consecutive reduction.
The economy was forecasted to grow in the range of 1% to 1.5% in 2025, following strong growth in the first quarter. The SNB Chairman, Martin Schlegel, stated that diminished inflation and mild price pressures influenced the decision to cut rates, with the bank reserving its next move for September.
Imports in Switzerland rose in May, contributing to a decrease in the foreign trade surplus, which dropped to CHF 1.98 billion from CHF 5.43 billion in April. In real terms, exports plummeted sharply by 10.2%, outpacing the 3.7% decline in April. Meanwhile, imports rose by 0.5% after a 10.4% slump in the preceding month.
Sources:
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- The Swiss National Bank (SNB) policy rate reduction to 0% in June 2025 was influenced by weak inflationary pressures with headline inflation turning negative at -0.1% in May 2025 and core inflation below 1.0%. The SNB aimed to support price pressures and economic growth amid subdued inflation.
- After the June rate cut, the SNB's inflation forecast suggested low average annual inflation rates of around 0.2% for 2025 and gradual increases to 0.5% and 0.7% in 2026 and 2027 respectively, under the assumption that the policy rate would remain at 0%.
- The rate cut set borrowing costs at zero for the first time since returning from negative rates, making credit cheaper. This easing of monetary policy was intended to stimulate economic activity by encouraging lending and spending.
- The SNB's outlook reflected expectations of steady economic growth of about 1% to 1.5% for 2025, supported by higher real wages and easier monetary conditions, despite some risks from weak global demand and geopolitical uncertainties.
In the midst of the escalating conflict between Israel and Iran, the business sector of Switzerland has felt the ripple effects, as large finance corporations such as UBS Group and ABB have witnessed significant drops in their stock prices. Despite these challenges, the Swiss National Bank (SNB) has taken the unprecedented step to lower its policy rate to 0%, aiming to stimulate economic growth and support price pressures through cheaper borrowing costs.
