Switzerland’s central bank on Thursday cut its key interest rate for the third straight meeting as it pivots away from worries about high inflation toward concerns about the impact of a strong currency on exporters. The Swiss National Bank lowered its key rate to 1%from 1.25%, having cut borrowing costs by the same amount in June. Three months earlier, it became the first central bank from a rich, developed economy to ease policy since the start of the global inflation surge in 2021. The central bank said it might lower borrowing costs again. Swiss policymakers have long been wary of allowing the Swiss franc to appreciate too much against the euro—since that would weaken the country’s exports to its largest market—and sometimes intervene in the currency markets. The franc weakened against the euro after the SNB’s first rate cut, but has regained most of that lost ground since late May. The franc is viewed by many investors as a safe haven when there is political or economic turmoil in other parts of the world, and a series of events have driven inflows to the currency, including legislative elections in France and the conflicts in Gaza and Lebanon.

The Swiss stock market was again boosted on Thursday by another significant performance by stocks from the luxury goods sector. Richemont shares gained 8.0 per cent, while Swatch shares rose by as much as 12.1 per cent. Swatch also benefited from statements by CEO Nick Hayek, in an interview with the business magazine ‘Bilanz’, who also mentioned a possible IPO as an option. The Hayek pool currently holds 28.5 per cent of the Swatch Group's capital and 44 per cent of the votes. The SMI gained 0.5 per cent to 12,210 points. Of the 20 SMI stocks, there were 10 losers and 10 gainers. A total of 21.07 (previously: 14.96) million shares were traded. Among the individual stocks, Logitech shares climbed 2.9 per cent after Micron Technology posted better-than-expected figures and also gave a positive outlook. In contrast, the defensive index heavyweights were mixed. Novartis was the day's loser in the SMI, down 1.5 per cent. Nestlé, on the other hand, recorded a plus of 0.5 per cent. Roche was down 0.3 per cent, although the pharmaceutical company's cancer drug Gazyva/Gazyvaro showed positive results in a Phase III clinical trial for the treatment of lupus nephritis.

European stocks made solid gains Thursday, with markets picking up momentum from Asia, where Chinese property stocks soared after the country's top policymakers pledged to offer more stimulus for the sector. The Stoxx Europe 600 index gained 1.3% to 525.6 points. In Paris, the CAC 40 and SBF 120 climbed by 2.3% and 2.2% respectively. The DAX 40 in Frankfurt added 1.7% and the FTSE 100 in London picked up 0.2%. Video games publisher Ubisoft (-13.4%) issued a profit warning for its current financial year, due to ‘weaker than expected’ initial sales of its ‘Star Wars Outlaws’ game and the postponement of the launch of ‘Assassin's Creed Shadows’, the new opus in its flagship licence. Sectors most exposed to the health of the Chinese economy were in demand. Luxury goods in particular stood out, led by Kering (+9.6%), Hermès (+9.1%) and LVMH (+9.9%). Their rivals Burberry (+8.7% in London) and Moncler (+6.7% in Milan) also performed well. Bénéteau shares jumped 15.9%. The boat builder has revised upwards its operating margin target for 2024. Hennes & Mauritz, or H&M (-4.6% in Stockholm), will not meet its operating margin target this year, although the Swedish ready-to-wear group reported that sales momentum accelerated in July and August, before picking up in September.

After taking a quick breather, markets are looking up again. Stocks rose Thursday, thanks in part to miners like Freeport-McMoRan and industrial firms including 3M and Caterpillar. Micron shares surged 15% after the company said robust AI demand lifted its earnings and that the outlook was bright. Economic data was also in focus, with several strong readings. Jobless claims undershot forecasts, while durable-goods orders proved unexpectedly robust. And the government said growth in recent years was stronger than previously estimated. Friday will bring data on personal income and spending, plus the Federal Reserve’s preferred inflation gauge. All three major indexes rose. The Dow Jones Industrial Average climbed 0.6%, or 260 points, and the tech-heavy Nasdaq rose 0.6%. The S&P 500 edged 0.4% higher and is on pace for its best performance through the first three quarters of the year since 1997, according to Dow Jones Market Data. Chip stocks rose following Micron’s big earnings report, with Qualcomm and Advanced Micro Devices advancing. Super Micro Computer retreated 12% after The Wall Street Journal reported the company is being probed by the Justice Department. Wells Fargo shares (+5.2%) posted their best session in seven months. According to Bloomberg, the San Francisco bank has asked the Federal Reserve (Fed) to review its risk management plan, a key step towards lifting the sanctions that have limited the growth of its balance sheet since 2018 following several scandals. The airline Southwest gained 5.4% after raising its revenue forecast for the third quarter due to ‘improved demand’ and announcing a new $2.5 billion share buyback plan. Consulting firm Accenture (+5.6%) reported a stronger-than-expected rise in profit and revenue in the final quarter of its 2023-2024 financial year, helped by increased demand for its generative artificial intelligence services.

The stock markets in China continue to soar on Friday. While the stock markets in Seoul are consolidating their recent gains slightly and the Japanese stock market is trending favourably thanks to the weakening yen, Shanghai and Hong Kong are posting strong gains for the third time this week thanks to Beijing's latest stimuli. In Hong Kong, the Hang Seng Index rose by 3.4 per cent. The composite index in Shanghai gained 2.1 per cent. As in previous days, the main beneficiaries of the economic stimuli are shares from the ailing property sector. China Vanke and Longfor Group rallied by 11.3 and 12.2 per cent respectively, while Poly Real Estate gained 9.1 per cent. In Tokyo, the Nikkei advances by 0.8 per cent to 39,243 points. In Seoul, the shares of chip manufacturer SK Hynix added another 2.2 per cent after Thursday's jump. Samsung Electronics increased by 0.7 per cent.

U.S. government bond yields were edging higher Thursday, with the benchmark 10-year Treasury rate hovering near its highest level since early September. Investors were digesting fresh economic data, included a revised reading of second-quarter U.S. economic growth, showing that the economy remains in pretty good shape. The 10-year Treasury note yield advanced by one basis point to 3.799%. The 2-year Treasury note yield climbed 8 basis points to 3.635%.

Price target Richemont: Royal Bank of Canada downgrades to CHF 145 (150) - Sector Performance
Berenberg raises Baloise target to CHF 172.50 - Hold
Rating Roche: Vontobel upgrades to Buy (Hold) - Target CHF 315 (274)
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