The Swiss stock market began a challenging trading week, showcasing a stark decline as investors adopted a risk-off strategy due to growing concerns about a slowdown in the world's largest economy. The Swiss Market Index (SMI) concluded the day with a notable decrease of 2.80%, reflecting a broader trend observed across global markets.
Analysts have pointed to recent economic data that has unsettled investors. The July labor market report indicated a worrying pace of nonfarm payroll additions, which has now fallen below the pre-pandemic average. Furthermore, the unemployment rate registered an uptick of 0.2 percentage points, reaching 4.3%.
This increase has activated the 'Sahm-rule,' which suggests that a recession is likely when the three-month average unemployment rate escalates by more than 0.5 percentage points from its lowest point in the past year. ANZ Research highlighted that the current average stands at 4.1%, having risen from a low of 3.6% in the preceding 12 months. In a recent press conference, Federal Reserve Chair Jerome Powell played down the significance of these metrics, characterizing them as statistical regularities rather than definitive predictors of future economic performance.
Still, the resulting data has sparked discussions among market participants regarding whether the Federal Open Market Committee (FOMC) has been proactive enough in responding to evolving economic conditions. The prevailing sentiment among analysts is a forecast for a reduction in interest rates by 200 basis points throughout the current cycle, with markets currently anticipating 100 basis points of cuts specifically in 2024. Meanwhile, domestic indicators reflect mixed signals about the Swiss labor market.
The KOF Employment Indicator showed an improvement, rising to 5.2 points in the third quarter of 2024, up from a revised 4.2 points in the previous three-month period. This rise suggests that while the labor market is normalizing, it is likely to experience a soft landing following the exceptionally positive trends observed in 2022 and 2023, according to KOF's assessment. On the corporate front, the week also brought notable news concerning the Swiss aesthetic and dermatology market.
Galderma [$GALD] enjoyed a modest gain of 1.33% after French cosmetics giant L'Oréal announced its acquisition of a 10% stake in the Swiss dermatology company. This strategic investment underscores Galderma's pursuit of growth within the dynamic aesthetics market, which has become increasingly competitive and lucrative..