Bloomberg News

Swiss Stocks Decline Amid Reports of S&P Downgrades in Euro Area

January 16, 2012

Jan. 13 (Bloomberg) -- Swiss stocks fell for the second time in three days as reports that some euro-area countries are close to being downgraded by Standard & Poor’s overshadowed falling borrowing costs at sovereign-bond auctions.

Novartis AG retreated after saying it will take $1.22 billion of charges. Nobel Biocare AG retreated 0.5 percent. The Swiss National Bank jumped 15 percent after saying it returned to an annual profit in 2011.

The SMI, a measure of the biggest and most actively traded companies, lost 0.4 percent to 5,996.34 at the close of trading in Zurich. Trading on the Swiss stock exchange was delayed today and started at noon after technical issues. The gauge is poised to close the week 0.3 percent lower. The broader Swiss Performance Index fell 0.3 percent today.

The downgrades may happen as soon as today, according to Dow Jones Newswires, which cited European Union sources. Germany’s rating will not be cut, Reuters reported, citing a senior euro-area source. S&P declined to comment on the reports.

“The feeling is that if France’s rating can be lowered, so should Italy’s, Spain’s and Portugal’s,” said John Plassard, director of Louis Capital Markets in Geneva. “To this we must also add that Germany,” and the region’s temporary bailout fund, which means “nothing has changed since 2011,” he said.

Italy sold 4.75 billion euros ($6.1 billion) of bonds, its maximum target, as yields fell. The Rome-based Treasury yesterday raised 12 billion euros selling Treasury bills. Spain and Germany this week received more bids than the amounts they targeted in their debt sales.

Creditor Banks

Talks between Greece and its creditor banks were put on hold after negotiations in Athens failed to yield an agreement. A proposal put forward by the steering committee representing financial firms has “not produced a constructive consolidated response by all parties,” the Institute of International Finance said.

The Thomson Reuters-University of Michigan preliminary index of consumer sentiment in January increased to 74 from 69.9 at the end of December, a report showed today. Economists had forecast an increase to 71.5, according to the median forecast in the Bloomberg survey. The gauge averaged 89 in the five years leading up to the recession that began in December 2007 and ended in June 2009.

The European Banking Authority will postpone the annual stress test for banks usually published in July, Handelsblatt reported, citing a spokeswoman for the EBA. The test will be delayed to allow time for banks to get fresh capital to fill gaps documented by the last stress test in December, the newspaper said. The test may be delayed until autumn or not happen at all this year, Handelsblatt said.

Novartis, Roche

Novartis led losses, falling 0.7 percent to 53 Swiss francs. The drugmaker will take a charge of $900 million in its fourth quarter 2011 results related to Tekturna, and a charge of $160 million to end research on two experimental drugs, Novartis said. The company will also cut 1,960 U.S. jobs that will lead to a charge of $160 million in the first quarter of 2012 and annual savings of $450 million by 2013.

Roche Holding AG, the world’s largest maker of cancer drugs, slipped 0.8 percent to 162 francs. Novartis and Roche make up almost 35 percent of the SMI. Nobel Biocare AG retreated 0.5 percent to 11.51 francs.

Swatch Group AG, the world’s biggest watchmaker, slid 0.8 percent to 372.10 francs.

The Swiss National Bank jumped 15 percent to 1,144 francs after the country’s central bank said it returned to an annual profit in 2011, citing an initial estimate. The profit was 13 billion francs ($13.8 billion) and the SNB said it will be able to make a distribution of 1 billion francs to cantons and the federation, quelling criticism spared by the previous year’s record loss.

OC Oerlikon Corp AG, the industrial equipment maker, rose 2.3 percent to 5.79 francs after Michael Foeth, an analyst at Vontobel Holding AG, raised the stock to “buy” from “hold.”

--With assistance from Tom Stoukas in Toronto and Alexis Xydias in London. Editor: Srinivasan Sivabalan

To contact the reporters on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net; 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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