The Swiss equity market opened lower on Wednesday, continuing its losing streak. The Swiss Market Index (SMI) fell 0.6% to 13,979 points, while the broader SMI index declined 0.5% to 3,071 points. Negative sentiment from US markets and high oil prices are dampening risk appetite. In the absence of significant corporate news, Novartis' shares remain in focus, having dropped around 1% in early trading after a strong decline the previous day. The German Bank has downgraded the stock from 'Buy' to 'Hold'.
In the construction materials sector, a JPMorgan study is providing some impetus. Holcim fell 0.4%, while Sika gained 0.2%. Amrize, however, was added to the 'Negative Catalyst Watch' list. DocMorris, a mail-order pharmacy, is issuing a new convertible bond of around 100 million Swiss francs. Despite the trend, Adecco (+2%) and Barry Callebaut (+2.2%) are performing well, following a revision of their price targets and a CEO comment at the investor conference.
In the pre-market session, the SMI is trading 0.4% lower at 14,005 points. Nineteen of the 20 SMI stocks are declining, with Novartis (+0.1%) being the only one gaining. Amrize (-1.2%), UBS (-0.7%), and Richemont (-0.5%) are among the worst performers in the index. The broader market is also falling pre-market by around 0.3%. The highest movements are expected in DocMorris (-3.5%), Bachem (+0.7%), and Barry Callebaut (+0.6%).
CEO Hein Schumacher of Barry Callebaut has reportedly calmed investor concerns regarding cocoa markets and El Niño risks. Analysts noted that Schumacher's tone was more reassuring than the fears of investors. Schumacher believes that market reactions to the cocoa crisis have become overly sensitive and that the industry is entering its second consecutive year with a cocoa surplus. He also does not see signs that the volatility of cocoa prices will lead to stronger inflation in retail chocolate prices.
Negative sentiment from the US is also affecting the Swiss market. The SMI could fall for a third consecutive day, with ADP employment data and the auction of 10-year US Treasuries in focus. In Switzerland, Bioversys and Medacta will release their half-year results, and Richemont will hold its general meeting.
Asian stock markets have shown resilience amid the escalating conflict in the Middle East. The Nikkei 225 in Tokyo gained 0.4% to 65,495.23 points, while the broader Topix rose 0.3% to 4,063.61 points. In China, the Shanghai Composite Index increased 0.3% to 3,953.13 points, and the SSE Composite Index rose 0.3% to 4,571.03 points.
In Japan, excitement over artificial intelligence (AI) has outweighed concerns about the expanding conflict in the Middle East. A $1 billion glass fiber deal between US companies Verizon and Corning has boosted domestic cable manufacturers. Furukawa Electric gained 13.2%, while pharmaceutical stocks like Kyowa Kirin and Sumitomo Pharma fell by around 5%.
In China, the impact of the Middle East conflict on the domestic economy is a focus. Attacks by Huthi rebels on Saudi Arabia and US strikes on Iranian oil tankers have driven up energy costs, increasing inflation in August. Producer prices rose 3.8%, while consumer prices increased 0.8%. The weak domestic demand has dampened a broader price increase.
In the forex market, the Japanese yen benefited from speculation about imminent interest rate hikes by the Bank of Japan. The US dollar fell 0.3% to 153.55 yen and rose slightly to 6,7083 yuan. It edged up to 0.8093 Swiss francs. The euro remained almost unchanged at 1.1628 US dollars and rose slightly to 0.9410 Swiss francs.
At the commodity market, the military escalation between the US, Iran, and its allies has raised supply concerns. Brent crude oil increased 1.5% to $99.40 per barrel, while US crude oil rose 1.4% to $94.35 per barrel.
On Wall Street, the Dow Jones Industrial Average fell 1.18% to 52,786.07 points, while the S&P 500 declined 0.58% to 7,673.52 points. The Nasdaq 100, a technology-heavy index, fell 0.12% to 29,507.70 points. Despite the weak start, the Nasdaq managed to offset losses in heavyweights like Apple, Nvidia, and Microsoft with gains in AI-focused stocks.
A market participant noted that with a week rich in market-moving events, risk appetite remains subdued, citing the upcoming EZB interest rate decision on Thursday and the US inflation data on Friday. Investors are also concerned about the ongoing tensions in the Middle East, with reports of explosions on the Iranian oil export island of Charg.
