The Swiss Market Index concluded Thursday with a decrease of 0.70%, a reflection of the commencement of the Swiss earnings season and the European Central Bank's (ECB) decision to maintain its key rates in July, as was widely anticipated. This trend underscores growing concerns around economic growth and inflation metrics. According to financial analysts at ING, the ECB's previous rate cut in June was influenced by an optimistic outlook for growth and inflation.
However, the current economic climate presents a stark contrast: an increasingly grim growth forecast coupled with persistent inflation challenges raises doubts regarding potential further rate cuts. "A September rate cut is anything but guaranteed, especially considering that inflation seems to be remaining stubbornly high.
We may require a more significant reduction in demand to align inflation with target rates. Therefore, the ECB's options appear limited in the foreseeable future," the analysts noted. They suggest that the probability of a rate reduction in September stands at 50%, with a complete certainty for a cut by December. On a domestic front, Switzerland reported a staggering trade surplus of 12.45 billion francs for the second quarter of 2024—the largest quarterly surplus recorded to date.
This figure marks a substantial increase from the previous quarter's surplus of 9.38 billion francs. Seasonally adjusted exports surged by 6.6%, reaching 69.15 billion francs, whereas imports saw a more modest rise of 2.2%, totaling 56.71 billion francs. In the realm of corporate performance, Novartis ($NOVN) has adjusted its full-year core operating income growth forecast upwards, thanks to robust earnings reported in the first half.
Nonetheless, its stock experienced a decline by 4.01% at closing, attributed to increasing competition from generic drugs that has negatively impacted its market position. Additionally, ABB ($ABBN), specializing in automation technologies, witnessed a notable 5.63% drop in its share value as the company reported decreases in both first-half and second-quarter orders.
However, year-on-year net income and revenue figures showed positive growth. Analysts at Bernstein commented, "ABB's results are generally aligned with expectations but include a slight miss at the EBITA level after adjustments for one-off corporate events. Both orders and sales matured at a rate lower than forecasted by 2%.
Disappointingly, there has been no significant demand surge in Electrification (EL) segments, and the Robotics & Discrete Automation (RDA) division has underperformed compared to earlier projections.".