Swiss stocks climbed to a 13-month high as German Chancellor Angela Merkel and French President Francois Hollande pledged to protect the euro and the U.S. economy expanded more than estimated.
Cie. Financiere Richemont AG led gains on the Swiss Market Index (SMI), advancing 3.8 percent. Vontobel Holding AG (VONN), the Swiss bank and brokerage specializing in derivatives, surged 10 percent after first-half net income beat analysts’ estimates.
The SMI rose 1.4 percent to 6,362.82 at the close of trading in Zurich, extending yesterday’s 1.6 percent jump for a weekly increase of 1.2 percent. The benchmark measure has advanced to the highest level since June 2011 after surging 11 percent from this year’s low on June 4. The broader Swiss Performance Index climbed 1.3 percent today.
“Both Chancellor Merkel and President Hollande said that they would do everything to protect the euro,” Chris Beauchamp, a market analyst at IG Index in London, wrote in e-mailed comments. “In the U.S., GDP growth came in broadly in line with expectations, at 1.5 percent for the second quarter, so we were spared any disappointment.”
The SMI rose the most in five weeks yesterday as European Central Bank President Mario Draghi said policy makers will do whatever is needed to preserve the euro.
The ECB is preparing a plan to buy Spanish and Italian debt in the secondary market in the coming weeks to be followed by purchases in the primary market by government-financed bailout funds, Le Monde reported today, without citing anyone. An ECB spokeswoman declined to comment.
Merkel and Hollande said their countries are “bound by the deepest duty” to keep the euro area intact and that they will do “everything” necessary to protect the single currency. The leaders commented in a joint statement made after a telephone conference today.
The European Financial Stability Facility has 240 billion euros ($295 billion) in capacity remaining after this month’s approval of as much as 100 billion euros of aid for Spain’s banks. The permanent 500 billion-euro European Stability Mechanism is on hold until a German court ruling in September.
“The bailout funds are not big enough to cover Spain and Italy and to solve all these problems,” Stefan Keitel, global chief investment officer at Credit Suisse Asset Management Ltd., said in a Bloomberg Television interview. “That’s the reason we have to have the ECB coming up rather sooner than later.”
U.S. gross domestic product, the value of all goods and services produced, rose at a 1.5 percent annual rate in the second quarter after a revised 2 percent gain in the prior period, Commerce Department figures showed. The median forecast of economists surveyed by Bloomberg News called for a 1.4 percent increase.
Bank of Japan Governor Masaaki Shirakawa has said the central bank will pursue “powerful monetary easing” until its 1 percent inflation goal set in February is in sight.
Richemont, the owner of the Cartier brand, added 3.8 percent to 56.80 Swiss francs, its biggest gain in two months. Swatch Group AG (UHR), the world’s largest watchmaker, increased 2.9 percent to 397 francs, its fourth day of gains.
Holcim Ltd., the second-biggest cement maker, advanced 3 percent to 57.30 francs, gaining for a second day.
Credit Suisse Group AG, Switzerland’s second-largest bank, rose 2.8 percent to 16.75 francs. UBS AG, the country’s biggest lender, added 1.8 percent the 10.52 francs. A gauge of bank shares was the second-best performer on the Stoxx 600 Europe Index, after automakers.
Vontobel surged 10 percent to 20.40 francs, the biggest jump in more than ten years. The bank said first-half net income declined to 66.6 million francs ($68.1 million) from 78 million francs a year earlier. That compared with the 45.3 million-franc median estimate of four analysts surveyed by Bloomberg.
Nestle SA (NESN), the world’s largest food company, contributed the most to the SMI’s gain as Danone, the biggest maker of yogurt, reported increased first-half profit. Nestle shares, which make up 26 percent of the Swiss gauge by weighting, rose 1.7 percent to 59.65 francs.
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