The Swiss Market Index commenced the trading week on a positive note, experiencing a significant uptick of 1.01% on Monday. This increase comes as investors anticipate a wave of crucial economic data along with business surveys set to be released in both the United States and Europe. Analysts are particularly focused on the upcoming second quarter US GDP, which is projected to rebound above 2% quarter-on-quarter on an annualised basis.
Additionally, Friday will see the release of June's core PCE inflation data, which is expected to align with the Federal Reserve's preferred inflation gauge, indicating a target of 0.2% month-on-month. According to ING, these data releases are not likely to significantly alter expectations regarding interest rate cuts from the Fed this year, with current projections suggesting a reduction of around 57 basis points.
In the political arena, US President Joe Biden has withdrawn from the presidential race, concluding his bid for reelection. He has generously endorsed Vice President Kamala Harris as the Democratic Party's nominee for the upcoming election. Turning to China, the central bank unexpectedly slashed its one-year and over-five-year loan prime rates to 3.35% and 3.85% respectively, as part of efforts to stimulate the economy.
The seven-day reverse repo rate was also adjusted downward, decreasing from 1.8% to 1.7%. Closer to home, Europe has shown some concerning trends. The euro area's seasonally adjusted general government deficit to gross domestic product (GDP) ratio stood at 3.2% in the first quarter, while the gross debt to GDP ratio approximated 88.7%.
These figures reflect a slight deterioration when compared to the prior three months, where they were recorded at 4% and 88.2% respectively. In the corporate sector, Spexis (SPEX.SW) faced a drastic decline of 41.49% after the clinical-stage biopharmaceutical firm warned of a potential trading suspension on the Swiss stock exchange.
This warning comes in light of delays in completing the audit process for its 2023 financial results. Complicating the scenario, the company is embroiled in a dispute with a major creditor, SPRIM Global Investments, and anticipates that the suspension, prompted by the incomplete financial report, may begin following July 31.
Conversely, Novartis ($NOVN) experienced a rise of 2.26% after Bernstein analysts increased their price target for the stock from 108 francs to 115 francs while still maintaining an outperform rating. This positive shift follows Novartis's stronger-than-expected results for the second quarter. Bernstein analysts noted, "Novartis presents solid visibility on earnings growth, despite facing exposure to generics, which constitute roughly 20% of its sales.
Their positive outlook is attributed to a variety of growth drivers and initiatives focused on cost-containment, projecting an earnings per share compound annual growth rate of 8% from 2024 to 2028—close to the sector's average. Our estimates also exceed market consensus by mid-single digits as we foresee stronger sales and enhanced margin expansion driven by an advantageous product mix.".