Bloomberg News

Swiss Stocks Retreat as U.S. Consumer Confidence Gauge Declines

October 25, 2011

Oct. 25 (Bloomberg) -- Swiss stocks fell, paring their biggest two-day gain in more than two weeks, as a report showed that U.S. consumer confidence plunged this month and investors awaited tomorrow’s European Union and euro-area summits.

Novartis AG, Europe’s biggest drugmaker by sales, dropped 3.3 percent after announcing plans to cut 2,000 jobs. Nobel Biocare AG, the world’s second-largest maker of dental implants by revenue, slid 6.5 percent.

The Swiss Market Index, a measure of the biggest and most actively traded companies, retreated 1.4 percent to 5,708.79 at the close in Zurich. The gauge has still rallied 19 percent from this year’s low on Aug. 10. The measure jumped 2.3 percent over the past two days, its biggest two-day increase since Oct. 7, amid speculation euro-area leaders are moving toward an agreement on how to stem the region’s debt crisis. The broader Swiss Performance Index fell 1.3 percent today.

“The uncertainty remains high,” Rolf De Zaiacomo, a trader at Luzerner Kantonalbank AG, wrote in a note to clients today. “Investors are likely to be cautious before tomorrow’s EU summit.”

Euro-area politicians will hold a second summit in four days tomorrow, seeking an agreement to bolster the region’s rescue fund, recapitalize its banks and provide debt relief to Greece to avoid contagion spreading to Italy and Spain. Leaders have yet to agree with banks on the size of losses that financial institutions will take on Greek bonds.

Euro-Area Summit

Tomorrow’s summit in Brussels follows an Oct. 23 meeting where euro-area politicians ruled out tapping the European Central Bank’s balance sheet to boost the European Financial Stability Facility, the region’s rescue fund. They also excluded a forced restructuring of Greece’s debt.

In the U.S., a release showed that consumer confidence unexpectedly slumped in October to the lowest level since March 2009, when the U.S. economy was in a recession, as Americans’ outlooks for employment and incomes soured.

Novartis retreated 3.3 percent to 50.10 Swiss francs, its largest drop in more than two months. The company said it will cut 2,000 jobs in Switzerland and the U.S. and close facilities in its home nation and in Italy to lower costs.

The drugmaker will make the changes over three to five years, generating annual savings of more than $200 million a year. Novartis will take a restructuring charge of about $300 million in the fourth quarter.

Nobel Biocare

Nobel Biocare sank 6.5 percent to 10.64 francs. Michael Jungling, an analyst at Morgan Stanley, said that Nobel will struggle to generate more than than the 20 percent internal rate of return that private-equity firms seek through a leveraged buyout. The company’s shares had jumped 25 percent over the previous two days, their largest two-day rally since January 2000, as investors speculated that buyout firms were considering acquiring the company.

Swisscom AG, Switzerland’s largest telecommunications company, lost 3.1 percent to 359 francs, its biggest drop in six months, as Carola Bardelli, an analyst at Deutsche Bank AG, cut the shares to “hold” from “buy.”

Valora Holding AG sank 18 percent to 192 francs, the biggest slump since September 2000. The company forecast earnings before interest and taxes of about 70 million francs ($80 million) this year. Valora had predicted full-year Ebit of at least 81 million francs.

GAM Holding Ltd., the money manager that split from Julius Baer Group Ltd. two years ago, dropped 3.6 percent to 10.60 francs. The company said assets under management fell 6.3 percent to 106.4 billion francs at the end of September, from 113.5 billion francs three months earlier, after markets slumped and clients made withdrawals.

Meyer Burger Technology AG plunged 13 percent to 20.55 francs as Europe’s biggest solar-panel equipment maker said it will temporarily halt output at its MB Wafertec unit in Switzerland amid “high uncertainties” within the solar industry.

--With assistance from Adria Cimino in Paris. Editors: Will Hadfield, Andrew Rummer

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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