In a notable shift among market sentiments, optimism surrounding the decision of the US Federal Reserve has overshadowed the less encouraging economic data emerging from Switzerland. As a result, the Swiss Market Index (SMI) closed with a modest gain of 0.29% on Wednesday, reflecting a cautious yet positive outlook among investors.
The latest economic sentiment index from UBS and the CFA Society Switzerland revealed a decline to 9.4 points in July, down from 17.5 points in June. This decline suggests a moderately optimistic outlook, as investors seem to anticipate a reduction in short-term interest rates not only in Switzerland but also across the eurozone and the United States.
On the macroeconomic front, the eurozone witnessed a slight uptick in annual inflation, moving from 2.5% in June to 2.6% in July, although this figure was still above the consensus expectation of 2.4%. The core inflation rate remained stable at 2.9%, surpassing the expected figure of 2.8% as well. Analysts from ING commented on the situation, stating, "Where do we go from here? It’s important to remember that in the ECB's June staff forecasts, headline inflation is projected to be 2.3% in the third quarter and 2.5% in the fourth.
However, as previously indicated, base effects from energy prices will heavily influence this forecast, resulting in greater volatility in headline inflation. Today's readings have slightly lessened the likelihood of a rate reduction in September, though we still have six weeks of data ahead before the ECB makes its decision." Turning back to Switzerland, the telecommunications giant Swisscom ($SCMN) experienced a slight decline of 0.09% following the release of its first-half financial results.
The company's net income rose to 836 million francs from 848 million francs in the prior year, while revenue remained consistent at 5.45 billion francs. Swisscom reaffirmed its revenue outlook for the full year 2024, projecting total revenues around 11 billion francs. In a stark contrast, the Swiss National Bank ($SNBN) reported a remarkable surge in its net result, skyrocketing to 56.80 billion francs in the first half of the year, compared to just 13.72 billion francs during the same period last year.
According to Reuters, this remarkable figure marks the highest interim profit in the bank's 117-year history. The bank's gross income also experienced impressive growth, climbing to 57.02 billion francs from 13.94 billion francs. However, the stock price slipped by 0.27% at market close, reflecting ongoing concerns over the central bank's losses, although those losses have shown improvement in the second quarter.
Overall, the mixed economic indicators suggest a cautious optimism within the financial landscape of Switzerland, showcasing a complex interplay between local performance and global economic sentiment..