The Swiss Market Index continued its winning streak, closing 0.50% higher on Thursday, reflecting upbeat market sentiment after Switzerland's central bank further eased its monetary policy. The Swiss National Bank cut its policy rate by 25 basis points to 1%, citing the significant decline of inflationary pressure in the country.
Switzerland's inflation stood at 1.1% in August, compared with 1.4% in May, mainly reflecting the appreciation of the franc in the last three months. The central bank also downwardly revised its inflation forecast, now expecting Swiss annual inflation to average 1.2% in 2024, 0.6% in 2025 and 0.7% in 2026.
SNB Chairman Thomas Jordan said the central bank may need to implement further cuts in the policy rate in the coming quarters to ensure price stability over the medium term, but cautioned that uncertainty about the future path of inflation remains high. "Ultimately, it seems that this 25bp rate cut is the most dovish possible by the SNB.
It did not want to make a jumbo 50bp cut but is clearly trying to ease pressure on the Swiss franc with forward guidance," analysts at ING said. "Given the inflation forecasts, we expect a further 25bp rate cut in December. A final cut could then take place in 2025, but it seems unlikely that the SNB will decide to cut its rate much lower than the 0.5% level as long as inflation remains in the 0-2% range.
In our view, inflation would have to be at risk of returning to negative territory for the SNB to decide to go lower." On the corporate front, The Swatch Group Chief Executive Nick Hayek said in an interview with Bloomberg News that there are no ongoing plans to delist the group from the Swiss bourse.
The statement comes after Hayek told business magazine Bilanz in a separate interview that the watches and jewelry manufacturer is considering going private, triggering a stock surge and trading halts. Swatch's shares jumped 12.09% at closing. Meanwhile, Deutsche Bank resumed its coverage of telecommunications company Swisscom with a hold rating and a price target of 570 francs.
Analysts expect the Vodafone Italia acquisition to increase Swisscom's free cash flow by over 40% by fiscal year 2028, compared with 2023 levels, improving the company's valuation, particularly for Swiss investors. The stock was down 0.36% at the end of the trading day..