Swiss stocks continued to experience negative momentum on Wednesday as investors analyzed the latest inflation figures from the United States. In a day characterized by a lack of significant local economic updates, the Swiss Market Index (SMI) concluded the trading session with a loss of 0.35%. According to the Bureau of Labor Statistics, the annual inflation rate in the US decreased to 2.5% in August 2024, down from 2.9% in the previous month.
This figure represents the lowest inflation rate recorded since February 2021 and falls below the consensus expectation of 2.6%. The Consumer Price Index (CPI) experienced a month-over-month increase of 0.2% in August, matching the increase seen in July. Analysts from Berenberg commented on the implications of this inflation data, stating, "[The 2.5% fall] reinforces the view that inflation fears are receding and that the Fed can now focus fully on engineering a soft landing.
The labor market continues to lose momentum, but the downtrend is not bad enough, in our view, to require a headline-grabbing 50 basis point rate cut at the Fed's next meeting on 18 September." They further elaborated, "We expect the Fed to cut rates by 25 basis points at each of its three meetings in the remainder of 2024, followed by two additional cuts in the first half of 2025.
Naturally, if the labor market and/or the overall economy deteriorates more than we currently anticipate, there is a risk that our outlook for the Fed will need to be adjusted towards a more aggressive stance." Shifting focus to corporate performances, Sandoz ($SDZ) saw a decrease of 0.20% after Berenberg lowered its rating on the stock from "buy" to "hold," while keeping the price target intact at 38.00 Swiss francs.
Analysts pointed out the "lack of upside" in Sandoz's earnings estimates, noting that the Swiss pharmaceutical firm has not made any substantial progress in its launch pipeline or provided any new earnings guidance in its strategic update on September 3. On the other hand, Nestlé ($NESN) faced legal challenges as it agreed to pay a fine of 2 million euros to resolve criminal allegations in France connected to its Nestlé Waters Supply Est unit's production of natural mineral water.
According to Bloomberg News, this court-approved settlement concludes investigations into this segment of the consumer goods giant, which has not admitted guilt in the matter. At the close of the market, Nestlé's stock was down 0.61%..