The Swiss Market Index closed 0.91% lower on Thursday, reflecting a broader regional retreat in Europe as investors navigate a cautious sentiment due to escalating tensions in the Middle East. Analysts express that the extent of Israel's retaliation against Iran will significantly influence market perceptions, potentially overshadowing the United States' economic narrative leading up to the vital payroll data that is due on Friday. In economic developments, the final HCOB Eurozone Composite PMI Output Index decreased to a seven-month low of 49.6 in September, a drop from 51 in August.
This decline signifies a concerning trend, as Germany, France, and Italy—the three predominant economies within the Eurozone—reported month-over-month contractions in business activity for the first time in 2024. Turning our focus back to Switzerland, the annual inflation rate has shown signs of easing, falling to 0.8% in September compared to 1.1% in August, marking the lowest inflation level in three years.
This latest data not only represents a decline but also falls short of market forecasts, which projected an inflation rate of 1.1%. In terms of consumer prices, core prices increased by 1% year-on-year while experiencing a month-over-month decline of 0.2%. Market analysts from Scotiabank noted, 'There has been a slight uptick in the pricing for potential cuts from the Swiss National Bank (SNB).
The sentiment is leaning towards expecting more than a quarter-point cut at the upcoming decision on December 12th, with projections indicating a terminal rate of 0.25% in the next year, down from the current 1%.’ The bank seems to be approaching its lower bound for interest rates, even as the Swiss franc has depreciated since the last cut, which has alleviated some pressures on the central bank that has been combatting currency strength. On the corporate front, Fitch Ratings has reaffirmed Roche's (RO.SW, $ROG) AA long-term issuer default rating, maintaining a stable outlook.
This affirmation is primarily anchored in the strong profile of Roche's innovative pharmaceutical business and its solid market positions across various therapeutic areas. The stock saw a slight decrease of 0.42% at market close. In other corporate news, Zurich Insurance Group ($ZURN) experienced a minor dip of 0.63% after announcing plans to reveal a new three-year strategy for the period of 2025-2027 at its Investor Day meeting scheduled for November 21, 2024.
The insurer has expressed confidence in its ability to surpass current targets, with the new strategy being introduced a year ahead of completing its existing 2023-2025 plan..