Currency market furore wipes $100 billion off Swiss stocks

By Atul Prakash

LONDON, Jan 15 (Reuters) – Frantic foreign exchange trading after the Swiss National Bank scrapped its euro cap on the franc took $100 billion off the value of Switzerland’s blue-chips on Thursday, putting them on track for their biggest one-day fall in at least 25 years.

The Swiss blue-chip SMI index slumped more than 8.6 percent, with stocks including Swatch, luxury-goods firmRichemont and cement-maker Holcim down between 12 and 14 percent in what some traders described as “carnage”.

Swiss-listed shares of offshore drilling contractor Transocean slumped to an all-time low. Lenders Julius Baer and UBS were down 10 percent.

The SNB’s shock decision to discontinue the cap against the euro it introduced on Sept. 6, 2011 to fight recession and deflation pressures sent the Swiss franc soaring by almost 30 percent, a move that rippled through global markets and which was seen hurting Swiss firms’ exporting power.

Swatch Chief Executive Nick Hayek called the decision “a tsunami” for Switzerland’s economy.

“It’s carnage,” Central Markets Investment Management’s head of trading, Darren Courtney-Cook, said.

“I’m a seller of Europe here.”

Stock markets fell across the region. The pan-European FTSEurofirst 300 index was down 1.3 percent.

“Equity markets have been shaken out by the Swiss move,” IG market analyst, David Madden, said.

“Markets are still struggling to puzzle out the full implications, but the sudden drop in equity markets as well in the FX sphere shows that the move caught everyone off guard.”

 

Swiss Franc Surges as S&P 500 Futures Decline With Stocks

By Stephen Kirkland and Nick Gentle

The Swiss franc strengthened to a record against the euro after the central bank ended its minimum exchange rate. Stocks in Switzerland tumbled, while Standard & Poor’s 500 Index futures signaled the gauge will extend this year’s losses.

The franc jumped 17 percent to 1.0263 against the euro at 6:46 a.m. in New York, after reaching 85.17 centimes. The Swiss Market Index slid 11 percent, with trading volumes almost nine times the 30-day average, according to data compiled by Bloomberg. Stocks in the U.K. andFrance pared earlier declines. S&P 500 futures retreated 0.6 percent. Copper rebounded from its lowest level since 2009, while oil fell 0.7 percent in New York.

The Swiss National Bank bank lowered the interest rate on sight deposit account balances that exceed a given exemption threshold to minus 0.75 percent from minus 0.25 percent. The move comes after India unexpectedly lowered its benchmark rate as a tumble in commodities eased inflation pressures. The European Central Bank meets next week amid speculation it will widen an asset-purchase program. Bank of America Corp. and Citigroup Inc. are among companies posting earnings today.

“Markets need some time to reassess the consequences,” said Pierre Mouton, who helps oversee $8 billion at Notz, Stucki & Cie. in Geneva. “The SNB’s situation had become unsustainable as the pressure on the franc was so high. It’s also possible that the SNB knows or thinks that the ECB will do something massive and put even more pressure on the franc, so they anticipated the ECB’s move.”

The SNB unexpectedly gave up its minimum exchange rate of 1.20 per euro today, ending a three-year-old policy designed to shield the economy from the euro area’s sovereign debt crisis. It also moved the target range for the three-month Libor to between minus 1.25 percent and minus 0.25 percent, from the current range of between minus 0.75 percent and 0.25 percent.

Stocks Tumble
The franc jumped at least 14 percent against its 16 major counterparts, climbing to 89.40 centimes versus the dollar, after touching 74.06 centimes, the strongest since August 2011.

Stocks fell with Cie. Financiere Richemont sliding 17 percent and both UBS Group AG and Roche Holding AG losing at least 12 percent.

The S&P 500 fell 0.6 percent yesterday, extending its 2015 decline to 2.3 percent, the worst start to a year since 2009.

BlackBerry Ltd. slid 16 percent in early New York trading after saying it hasn’t engaged in takeover talks with Samsung Electronics Co. The stock soared 30 percent yesterday after Reuters reported that Samsung had recently made a bid valuing the Canadian smartphone maker at as much as $7.5 billion.

India Rates
India’s S&P BSE Sensex jumped 2.7 percent, the most since May, and the rupee strengthened 0.8 percent. Central bank Governor Raghuram Rajan cut the benchmark repurchase rate to 7.75 percent from 8 percent, the first reduction since May 2013, and said inflation will probably be below 6 percent by January 2016.

The Shanghai Composite Index (SHCOMP) increased 3.5 percent and the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 1.5 percent. China’s aggregate financing surged to 1.69 trillion yuan ($273 billion) in December, exceeding the 1.2 trillion yuan median estimate in a Bloomberg survey.

Russia’s Micex Index of stocks rose 0.8 percent and the ruble slipped 0.6 percent.

Copper led a rebound in industrial metals after slumping to the lowest in more than five years as credit growth surged in China. The nation accounts for 45 percent of global copper demand, compared with 8 percent for the U.S., Morgan Stanley estimates.

Copper climbed as much as 2.7 percent to $5,699 a metric ton on the London Metal Exchange. The metal slid 5.3 percent yesterday to its lowest closing price since July 2009 amid speculation China’s copper demand growth is slowing.

Oil resumed its decline as U.S. crude output increased, bolstering speculation the global glut that spurred last year’s price slump will persist. Production surged to 9.19 million barrels a day last week, the fastest pace in records dating back to 1983, the Energy Information Administration reported yesterday. – Bloomberg

West Texas Intermediate crude fell to $48.13 a barrel. WTI surged the most since 2012 yesterday. Brent slipped 1.9 percent to $47.79.

(The direction of the yield move on U.K. gilts was corrected in a previous version of this story.)

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