Swiss Stocks Collapse 11%, European Markets Rise on SNB Action

Nigel Thomas
15 Jan, 2015
New York City

Associated British Foods sales rose 3% and sales at Primark surged 15%. Lavendon said yearly sales climbed 6%. Tullow Oil estimated annual revenues of $2.2 billion. Richemont sales in the third-quarter jumped 4% to

[R]4:00 PM Frankfurt – Associated British Foods sales rose 3% and sales at Primark surged 15%. Lavendon said yearly sales climbed 6%. Tullow Oil estimated annual revenues of $2.2 billion. Richemont sales in the third-quarter jumped 4% to €3 billion.[/R]

Swiss National Bank abandoned franc peg to euro that only a month ago central bank had said it has “unlimited” funds to support.

In a sharp reversal to of policy, the central bank said it will no longer defend the minimum peg of 1.20 franc to a euro ahead of key meeting of the policymakers at European Central Bank.

The central bank also lowered its interest rate by 50 basis points to -0.75% meaning investors will have to pay now to hold deposits in Swiss franc. The move is likely to dissuade away foreign investors from the popular currency.

The bank also said it will move interest rate target for three-month London interbank offered rate for francs deeper into negative territory. The rate range is now revised to minus 1.25% and minus 0.25% from the current target range of minus 0.75% to 0.25%.

SNB had put in place the peg with the euro in 2011 after the franc had become the favourite destination for many investors who were seeking a safe haven from the rising turmoil in the euro zone.

In London trading, FTSE 100 index gained 0.9% or 58.48 to 6,446.94 and in Frankfurt the DAX index climbed 2% or 194.94 to 10,012.02.

In Paris, CAC 40 index jumped 1.8% or 77.52 to 4,300.76.

After the SNB move, exporting companies like Holcim Ltd and Swatch dropped as much as 15% along with the plunge in market index. Julius Bear, Group Ltd plunged 12%, Credit Suisse Group AG and UBS Group AG dropped 11%.

SMI index, dropped as much as 14% before recovering close down 10.2% to 8,262.47.

European Stocks in Review

Associated British Foods Plc slipped 1.4% to 1,641 pence after the U.K.-based food and textile retailer reported group revenue for the sixteen-weeks ending on January 3 jumped 3% and sales at Primark surged 15% from a year ago period.

Lavendon Group Plc climbed 3.5% to 170.96 pence after the U.K.-based rental powered access equipment provider said total rental revenues for the year ending in December climbed 6% from a year ago period after rate of revenue growth in the Middle East business climbed 20%.

As of December, net debt of the company reduced to £90 million from £97 million from a year ago.

Tullow Oil Plc gained 1.2% to 362.10 pence after the U.K.-based oil and gas producer forecasted revenues for the year of about $2.2 billion and gross profit of $0.6 billion and pre-tax operating cash flow of about $1.5 billion from a year ago.

The company estimated impairment charge for the year of $0.6 billion including acquisition of Spring Energy and a loss of $0.5 billion mainly relating to an updated assessment of the Uganda and the partial sale of the UK Schooner and Ketch gas fields.

Today the company announced largest write-off of about $2.7 billion before tax.

Compagnie Financiere Richemont SA tumbled 15.3% to 75.15 Swiss francs after the Switzerland-based luxury goods maker reported sales in the third-quarter jumped 4% to €3.05 billion from €2.94 billion a year ago period.

The luxury goods maker said sales from Europe climbed 10% to €1.19 billion and from America region surged 14% to €547 million while in the Asia Pacific region declined 5% to €1.07 billion and from Japan dropped 2% to €242 million from a year ago period.

Retail sales in the quarter jumped 5% to €1.74 billion and wholesale sales increased 2% to €1.31 billion from the same period a year ago.