Swiss equities experienced a significant downturn on Wednesday, with the Swiss Market Index falling by 0.87%. This decline comes as investors analyze the latest inflation statistics from Europe, while simultaneously preparing for the upcoming decision from the US central bank regarding interest rates. The final annual inflation rate for the euro area rose to 2.2% in November compared to 2% in October.
This recent reading, however, was lower than the previous 2.3% flash estimate, based on data from Eurostat. Month-on-month, inflation saw a decrease of 0.3%. In the UK, the annual inflation rate increased to 2.6% in November from 2.3% in October, aligning with market forecasts. ING has commented, "Services inflation is stuck at 5% and will stay around there for the next few months.
However, further progress, supported by more manageable annual increases in index-linked prices in April, should lead to a marked decrease in 'core services' inflation during the spring. We anticipate this will prompt the Bank of England to initiate rate cuts quicker than the market currently expects.
Our base case forecasts back-to-back rate cuts starting in February, resulting in a target Bank Rate of 3.25% by the end of the year." In terms of economic developments in the US, the Federal Reserve is broadly anticipated to implement a further reduction of 25 basis points later today. As noted by analysts at ING, "Our baseline expectation for today is that the slight hawkish adjustment in Fed communication will keep markets satisfied with existing predictions for further meetings: a hold in January, followed by a roughly 50% implied chance of a March adjustment." Turning to corporate news, Lonza Group ($LONN) saw a slight drop of 0.15% after RBC Capital Markets reaffirmed its sector perform rating and increased its price target from 590 francs to 610 francs for the renowned Swiss pharmaceutical manufacturer.
RBC suggests that the risks surrounding the company's rating and price target for the upcoming six months have decreased following Lonza's reaffirmation of its 2024 forecasts alongside the establishment of its guidance for 2025. In other developments, ABB ($ABBN) has made a strategic move by agreeing to acquire Gamesa Electric's power electronics sector from Siemens Gamesa for an undisclosed amount.
This acquisition is expected to enhance ABB's portfolio in renewable power conversion. The deal is projected to finalize in the second half of 2025, but remains subject to regulatory approvals and standard closing conditions. The stock for this Swiss-Swedish company finished 0.69% lower..