Swiss stocks remained buoyant on Thursday, with the Swiss Market Index closing 0.29% higher, reflecting positive sentiment after the Swiss National Bank (SNB) and European Central Bank (ECB) further eased their monetary policies. The SNB reduced its key policy rate by 50 basis points to 0.5%, noting the continued decline in underlying inflationary pressure within the country.
As of November, Switzerland's inflation was reported at 0.7%. This latest rate cut exceeded consensus estimates of a 25 basis point reduction. Meanwhile, the ECB also cut its interest rates, as anticipated, by 25 basis points, adjusting the deposit facility to 3%, the main refinancing operations to 3.15%, and the marginal lending facility to 3.40%.
Berenberg commented, "The 25bp cut in the deposit rate to 3.00% seems to represent a compromise between doves and hawks. While hawkish members are focusing on persistent wage growth and sticky core inflation, doves are considering the weak economic performance and the expectation that inflation is moving towards the 2% target." The firm further mentioned, "Given the slightly dovish ECB forecasts and the evident downside risk to growth from a potential trade dispute with the US that may materialize next year, we have revised our prediction to anticipate three rate cuts instead of two in 2025, which could lower the deposit rate to a terminal 2.25% by the summer of 2025.
A 50bp cut in January appears unlikely, as core inflation is expected to recede gradually." In corporate developments, Lonza Group gained 4.94% following the unveiling of its new strategy and proposed structural changes during its investor update. This Swiss pharmaceutical manufacturing company intends to sharpen its focus on core contract development and manufacturing, reorganizing it into three new business platforms and planning to exit its capsules and health ingredients segment.
Analysts at RBC Capital Markets noted, "Lonza's update was overall positive... the exit from the capsules business in due course will alleviate growth constraints and enhance the balance sheet, although it might lead to non-cash write-downs. This will empower the company to pursue a more dynamic M&A strategy." Conversely, Leonteq shares fell by 11.25% after the company revised its full-year 2024 profit guidance due to a disgorgement of 9.3 million francs by the Swiss financial market regulator FINMA, attributed to deficiencies in distributing its financial products through unregulated channels..