Bloomberg News

Swiss Stocks Advance; Swiss Re Rises as Transocean Shares Slump

November 04, 2011

Nov. 3 (Bloomberg) -- Swiss stocks rose for a second day as the European Central Bank unexpectedly lowered its benchmark interest rate and investors speculated that Greece would call off a referendum on the euro area’s latest bailout package.

Swiss Re Ltd., the world’s second-biggest reinsurer, rallied 6.1 percent after third-quarter profit more than doubled. Transocean Ltd. slumped the most since June 2010 as the world’s biggest provider of offshore oil rigs posted its largest third-quarter loss in at least a decade.

The Swiss Market Index, a measure of the largest and most actively traded companies, rose 1 percent to 5,668.05 at the close in Zurich. The gauge has still retreated 16 percent from its high this year on Feb. 18. The broader Swiss Performance Index added 1.2 percent today.

Swiss stocks extended their advance after ECB officials, meeting under the presidency of Mario Draghi for the first time, lowered the benchmark interest rate by 25 basis points to 1.25 percent. Of 55 economists in a Bloomberg News survey, four predicted a quarter-point cut and two expected a half-point reduction, while the rest predicted no change.

German Chancellor Angela Merkel and French President Nicolas Sarkozy ended emergency talks in Cannes late yesterday by withholding 8 billion euros ($11 billion) of aid from Greece, warning that it will get no further handouts if it votes against the bailout package in a referendum.

Vote Scrapped

Sarkozy said Prime Minister George Papandreou ’s government won’t get a “single cent” of aid if voters rejected the bailout. Merkel told reporters, “the referendum will revolve around nothing less than the question: does Greece want to stay in the euro, yes or no?”

Swiss stocks also gained as the European Central Bank, meeting under the presidency of Mario Draghi for the first time, lowered the benchmark interest rate by 25 basis points to 1.25 percent. Of 55 economists in a Bloomberg News survey, four predicted a quarter-point cut and two expected a half-point reduction, while the rest predicted no change.

In the U.S., the Federal Reserve said additional purchases of mortgage-backed securities are a “viable option” if the economy requires further easing. The Federal Open Market Committee left the benchmark interest rate unchanged, saying economic growth strengthened while “significant downside risks” remain.

Bernanke warned that economic improvement will probably be “frustratingly slow,” with policy makers forecasting a 1 percentage-point drop in the jobless rate to about 8 percent over two years.

Swiss Re, Zurich

Swiss Re surged 6.1 percent to 49 Swiss francs, pushing a gauge of European insurers higher for the best performance on the Stoxx Europe 600 Index, after the company said third-quarter profit more than doubled, climbing to $1.35 billion. That beat the $539 million average estimate of nine analysts in a Bloomberg survey.

Zurich Financial Services AG, Switzerland’s largest insurer, rose 2.3 percent to 200.90 francs.

Transocean tumbled 12 percent to 43.70 francs, its biggest drop since June 2010. The company posted its largest third- quarter loss in at least a decade after costs associated with its $1.4 billion acquisition of Aker Drilling ASA wiped out the benefits of rising rental rates for the company’s drilling rigs. Transocean posted a $71 million loss, compared with a profit of $368 million a year earlier.

Petroplus Holdings AG, Europe’s biggest independent refiner, fell 1.3 percent to 4.45 francs after Jefferies Group Inc. reduced its price estimate for the shares to 5 francs from 18 francs.

--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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