Credit Suisse bondholders sued Switzerland in a Manhattan federal court on Thursday, alleging the country put national interests above the law when their bonds were voided in the banks rescue last year by UBS. Switzerland stunned markets by ordering $17 billion in so-called AT1 bonds at Credit Suisse to be written down before UBS bought it, upending the usual practice of bondholders having a priority claim over shareholders. Holders of the bonds, ranging from distressed debt funds to U.S. and Swiss pension fund managers, say the writedown was disproportionately punitive. Switzerland acted as self-interested politicians, ramming through the deal, ignoring the multitude of other potential buyers, Thursdays lawsuit filed in Manhattan alleged. Without any competitors, UBS was free to name its price and dictate the terms of its acquisition. Switzerland has shrugged off accusations that investors were misled on how a large banks failure would be handled, and that authorities handed Credit Suisse to UBS on the cheap. UBS posted a record $29 billion net profit in the second-quarter of 2023 to reflect the knock-down price of $3.7 billion in stock it paid for Credit Suisse. Thursdays lawsuit follows those filed last year in Switzerland seeking to reverse the write-down decision. The investment funds bringing the suit, which was submitted by law firm Quinn Emanuel Urquhart & Sullivan, argue that sovereign immunity shouldn’t apply, because the commercial effects of Switzerlands rescue plan were felt in New York. The bonds of those suing were cleared and held by a New York securities depository, and Switzerland developed its procedures for failing banks alongside U.S. and New York regulators, according to the lawsuit. Quinn Emanuel is also representing the claimants in Switzerland holding billions in the bonds. The New York suit is seeking the face value plus interest on around $87 million in bonds held by the plaintiffs, plus costs. Dennis Hranitzky, a Quinn Emanuel partner, said he expects other institutional investors to join the New York action, including one who lost hundreds of millions in client retirement investments from Switzerlands decision.

Share prices in Switzerland continued to rise on Thursday. Once again, the bullish sentiment extended across all sectors. After all 20 SMI shares closed higher on Wednesday, this time the figure was 18, with the SMI gaining 0.8 per cent to 12,241 points. A total of 18.45 million shares were traded (Wednesday: 16.59 million). The weakest SMI stock was Partners Group. The shares of the private markets investment manager lost 1.9 per cent, weighed down by a downgrade to ‘neutral’ from ‘buy’ by UBS. Across Europe, bank shares were firmly in the market, with UBS gaining 1.5 per cent in Zurich, only outperformed by Logitech (+2.0%) and Richemont (+1.6%). As the ECB signalled a rather slow turnaround in interest rates, interest rates are likely to fall only gradually, which is favourable for margins in the lending business of financial institutions. Julius Baer was under pressure, with its share price falling by 5.3 per cent. In contrast, EFG International rose by 5.5 per cent. The background was speculation about a takeover. The website ‘Inside Paradeplatz’ referred to rumours that an acquisition of the private bank by Julius Baer worth CHF 4.5 billion would be announced on Friday after the close of trading. Both companies declined to comment on the matter.

The European stock markets closed higher on Thursday after the European Central Bank (ECB) cut its key interest rates for the first time in almost five years, while tempering expectations of a rapid easing of its monetary policy. The Stoxx Europe 600 index gained 0.7% to 524.7 points. In Paris, the CAC 40 and SBF 120 rose by 0.4% each. The DAX 40 climbed 0.4% in Frankfurt and the FTSE 100 added 0.5% in London. The European Central Bank (ECB) cut its key rates by a quarter of a point on Thursday. This decision had been widely anticipated by the markets. Euroapi gained 3.8%. The French manufacturer of active pharmaceutical ingredients (APIs) announced on Thursday that it was one of 13 companies selected by the European Commission to share up to €1 billion in public funding. Rémy Cointreau fell by 0.1%. The spirits group's results fell less than expected in the 2023-2024 financial year. Over the period, its profit from recurring operations (ROC) came to €304.4 million, down organically by 27.8% compared with 2022-2023, and giving a margin of 25.5%, compared with analysts' expectations of an ROC of €299.8 million and a margin of 25.1%. Aerospace equipment supplier Safran (-0.5%) confirmed on Thursday that the Italian government had given the go-ahead for the French engine-maker and aerospace equipment supplier to acquire Microtecnica, a company combining the assets of the US group Collins Aerospace in Italy.

The S&P 500 slipped from its latest record Thursday, dragged slightly lower by a pullback in technology stocks. Two of the index’s largest stocks, both in the tech sector, traded lower. Nvidia declined 1.2% a day after becoming the third U.S. company with a market value above $3 trillion, while Apple fell 0.7%. Gains in other areas limited the damage. Consumer stocks advanced, helped by big moves in shares of Lululemon Athletica and J.M. Smucker. The communication services group rose, pushed higher by Google parent Alphabet. All in all, the S&P 500 dropped less than 0.1%, snapping a four-session winning streak. The Dow Jones Industrial Average added 0.2%, or about 79 points. The tech-heavy Nasdaq Composite fell 0.1% after notching its own record Wednesday. The broad U.S. stock index swung between small gains and losses in the morning before turning lower in afternoon trading. It then pared its losses to end the day nearly flaStocks have rallied in 2024 even as investors have dialled back their expectations for multiple rate cuts. Data has suggested that the economy remains resilient, easing fears that the Fed’s campaign to tame inflation would result in a painful contraction. The S&P 500 is up 12% this year, while the Nasdaq is up 14%. Lululemon shares gained 4.8% after the maker of yoga pants unveiled better-than-expected results and announced a $1 billion increase to its share-buyback program.

Asian stocks were mixed on Friday. However, the fact that the stock exchanges in China and Hong Kong are closed on Monday for the Dragon Boat Festival is likely to have caused investors to be cautious. There will also be no trading in Australia at the start of the week due to King's Day. In Tokyo, the Nikkei index fell slightly by 0.2 per cent. On the Hong Kong stock exchange, the Hang Seng Index lost 0.4 per cent. On the Chinese mainland, the Shanghai Composite dropped by 0.2 per cent. In South Korea, however, the Kospi rose significantly by 1.0 per cent. Shares in index heavyweight Samsung Electronics were down 0.1 per cent. In Sydney, the S&P/ASX 200 climbed slightly by 0.2 per cent. Over the course of the week, weaker-than-expected economic growth data had recently eased concerns about a tighter monetary policy in Australia.

U.S. government debt yields stalled on Thursday. The 10-year Treasury note yield oscillated around 4.29%. The 2-year Treasury note yield also remained stable at 4.73%. Traders might have been reluctant to make big bets ahead of Friday’s monthly jobs report, some analysts said. The data could provide fresh clues about the strength of the economy and the likelihood that the Federal Reserve will begin to cut interest rates soon. The central bank’s rate-setting committee is scheduled to meet next week.

Price target Burckhardt: Kepler Cheuvreux raises to CHF 700 (675) - Buy
Rating Partners Group: UBS downgrades to Neutral (Buy) - Target 1250 (1263) CHF
Target price Tecan: UBS lowers to CHF 412 (420) – Buy

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