The Swiss Market Index advanced on Wednesday, closing 0.76% higher, as investors await the Swiss National Bank's rate decision tomorrow and expectations of a continued fall in inflation. Inflation in Switzerland continues to surprise on the downside, alongside a strong Swiss franc that is weighing on exporting companies.
A 25 basis point rate cut is anticipated on Thursday, with expectations that the Swiss National Bank could be more explicit about its interventions in the currency markets. Given the recent developments, the Swiss National Bank is expected to lower its inflation forecasts significantly during Thursday's meeting, particularly for 2024 and 2025.
In the June meeting, the bank had projected inflation rates of 1.3% for 2024, 1.1% for 2025, and 1% for 2026, all of which have already been revised downwards compared to the projections made during the March meeting. The KOF Swiss Economic Institute has also provided estimates indicating that inflation is likely to ease further, expected to reach 1.2% in 2024 and 0.7% in the subsequent two years.
This scenario suggests that additional interest rate cuts could be implemented by the Swiss National Bank. However, KOF's autumn forecast presents a rather gloomy outlook for Switzerland's economy in 2024, primarily owing to economic weaknesses observed in Europe. The nation’s real sports-adjusted gross domestic product is projected to rise by 1.1% in 2024, hampered by weak investments that are inhibiting growth.
Over the following years, GDP is forecasted to increase by 1.6% in 2025 and 1.7% in 2026. In the context of corporate performance, Switzerland's economic sentiment index plummeted to -8.8 points in September from -3.4 points in August. This decline indicates a growing pessimism regarding the country's economic growth over the next six months, as detailed by UBS & CFA Society Switzerland.
On corporate fronts, Roche demonstrated a 1.19% increase. The Swiss drugmaker is narrowing its pharmaceutical pipeline to focus on 11 disease areas as it pushes into the market for obesity drugs, as stated by Teresa Graham, head of the pharma division, in an interview. This strategic shift will be further elaborated during an investor event scheduled for September 30.
In other news, Medacta Group reported an impressive 30.4% year-over-year increase in its first-half profits, reaching 38 million euros. The Swiss orthopedic products company also saw revenue growth during this period, rising from 255.1 million euros to 288.6 million euros, with the stock closing up by 3.70%..