Swiss roll throws markets into turmoil
Move sends most European shares soaring as bond yields and Swiss equities tumble
The Swiss National Bank scrapped its euro cap on the franc and drove Swiss stocks down nearly 9 per cent, their biggest one-day percentage fall for at least 25 years. One trader described the central bank’s move as “carnage”. Photograph: Martin Leissl/Bloomberg
Switzerland’s move to jettison a three-year-old cap on the franc threw global markets into turmoil yesterday, sending the currency and most European shares soaring while bond yields and Swiss equities tumbled.
The franc jumped almost 30 per cent in the chaotic minutes after the Swiss National Bank stunned markets by lifting the 1.20-a-euro cap that had been in place since late 2011.
The Swiss currency surged as high as 0.8052 francs to the euro before paring some gains, to trade 15 per cent higher at 1.01850. The sharp moves in financial markets shattered any hopes investors had that recent volatility might ease.
Switzerland’s main share index fell 8.7 per cent in its biggest single-day sell-off by percentage in 25 years, wiping about $100 billion of market value off Swiss companies.
Food groups Glanbia and Kerry had another good day, finishing up 3.2 per cent and 1.8 per cent, at €13.71 and €60.20 respectively. It follows Wednesday’s positive report on the Irish food industry and two positive broker notes, suggesting both companies were undervalued.
After closing the previous session 9 per cent down on foot of a profit warning, drinks group C&C traded flat at €3.40.
Dragon Oil finished 54 cents, or 8 per cent, up at €6.78 on the back of movements in international oil prices.
Ryanair fell by 3 cents to €9.82, albeit on light volumes.
Fears of turmoil from the Swiss move sent investors piling into the safe haven of gold, helping London-listed Randgold Resources to top the FTSE 100 risers board with a rise of 6 per cent, to 5265p.
Fellow miners also climbed – recouping losses in the previous session – with BHP Billiton up 5 per cent and Fresnillo up 855p. Oil giant BP, which has announced it is cutting hundreds of jobs amid the oil plunge, added 10.4p to 392.6p. Royal Dutch Shell advanced 77p to 2129p.
In a busy session for trading updates, Primark owner Associated British Foods rose nearly 4 per cent, to 3147p, after it reported another strong performance from its retail arm, with sales up 15 per cent in the 16 weeks to January 3rd.
Stocks including watchmaker Swatch, luxury goods firm Richemont and cement maker Holcim slumped from 11 and 16 per cent as the franc surged against the euro. Swiss stocks lost some 105 billion Swiss francs of their combined market value, or 8.67 per cent.
Swiss banks Julius Baer and UBS fell more than 11 per cent.
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Bank of America and Citigroup fell at least 3.3 per cent as both banks reported a drop in fourth-quarter profit as revenue from fixed-income trading declined.
Best Buy tumbled 11 per cent as the largest electronics retailer warned that price pressure and sluggish demand may hamper results in the coming year. Newmont Mining jumped 8.9 per cent as copper rebounded. – (Additional reporting: Bloomberg/Reuters)