Bloomberg News

Swiss Stocks Slide to One-Month Low Amid U.S. Debt Talks

October 07, 2013

Stocks in Switzerland fell to a one-month low as U.S. House Speaker John Boehner ruled out raising the federal government’s debt limit without preconditions.

UBS dropped 2.2 percent after the Financial Times reported that Switzerland’s largest lender is among banks being probed by the financial regulator for allegedly manipulating the foreign exchange market. Adecco SA posted the only gain in the Swiss Market Index after Barclays Plc lifted its recommendation on the world’s largest provider of temporary workers and HSBC Holdings Plc boosted its price target on shares.

The SMI (SMI) slid 0.7 percent to 7,887.86 at the close of trading in Zurich, the lowest since Sept. 4. The gauge has retreated 1.7 percent this month as U.S. lawmakers failed to agree on a federal budget, partially closing government operations and setting up a showdown over the nation’s authority to borrow. The broader Swiss Performance Index decreased 0.6 percent today.

“Europe looks set for a rocky start to the week,” Alastair McCaig, a market analyst at IG in London, wrote in an e-mail today. There’s an “increasing ‘fear factor’ as the U.S. stumbles towards hitting its debt ceiling.”

The U.S. government shutdown entered a seventh day as Democrat and Republican lawmakers continue to clash over the federal budget. The deadlock looks set to seep into talks to raise the country’s $16.7 trillion debt ceiling.

Boehner said yesterday in an interview on ABC that Republican lawmakers can’t pass a debt-ceiling increase without packaging it with other provisions, something President Barack Obama has said is unacceptable. Boehner said the country could default if President Barack Obama doesn’t negotiate.

Exhaust Borrowing

Without an increase to the debt limit, the U.S. will exhaust its borrowing authority on Oct. 17 and would run out of funds to pay all of its bills sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office. The House and Senate weren’t in session yesterday and there were no meetings planned between the two sides.

Obama’s administration has said it won’t negotiate with Republicans over funding the government or raising the debt ceiling.

The SMI rose 3.6 percent in September, extending its gain last quarter to 4.4 percent, as the Federal Reserve maintained the pace of its monthly bond purchases. The gauge has rallied 16 percent in 2013. The volume of shares changing hands in SMI-listed companies today was 10 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.

UBS Slides

UBS (UBSN) dropped 2.2 percent to 18.16 Swiss francs. The Swiss Financial Market Supervisory Authority “is coordinating closely with authorities in other countries as multiple banks around the world are potentially implicated,” it said in a statement Oct. 4, without identifying which firms it’s investigating.

UBS is among the banks being probed, the Financial Times reported today, citing unidentified sources. Dominik Von Arx, a London-based UBS spokesman, declined to comment.

Peach Property Group Ltd. sank 7.3 percent to a record low of 10.20 francs. The developer of luxury homes said it would report a loss this year after unexpected costs related to construction projects.

The Zurich-based company will have additional costs of about 15 million euros ($20.3 million) after the insolvency of its general contractor on two of its projects in Berlin, according to a statement late on Oct. 4. The “vast majority” of these costs will affect this year’s earnings, which are “expected to be negative as a result,” it said.

Adecco (ADEN) climbed 0.6 percent to 64.30 francs. Barclays raised its recommendation on the company to overweight, similar to a buy rating, from equal weight and increased its price target to 80 francs, saying shares do yet fully price in the euro-area economic recovery. HSBC boosted its price target to 68 francs from 54 francs to reflect the turnaround in labor markets.

To contact the reporters on this story: Andrew Rummer in London at arummer@bloomberg.net; Inyoung Hwang in London at ihwang7@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net


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