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Inflation in Switzerland higher than expected

Switzerland saw prices rise more sharply than expected in April. Inflation risks have not yet been completely overcome, but the Swiss National Bank is nevertheless expected to cut interest rates further over the course of the year. Europe's markets were subdued on Thursday following the Fed's decision, while markets in the US and Asia trended higher. 

Antonia Strachwitz, LGT
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The Swiss Federal Statistical Office announced yesterday that inflation in Switzerland was higher than expected in April. Swiss consumer price index inflation rose to 1.4% last month, up from 1.0% in March. The increase interrupts the slowdown in inflation observed in recent months, but is still in line with the Swiss National Bank's (SNB) conditional forecasts for the second quarter and within its target range of 0 to 2%. Core inflation also rose from 1% to 1.2% and the national consumer price index climbed by 0.3% to 107.4 points compared to March. The price trend in April came as a surprise and, according to the Federal Office, was due to higher costs for package holidays abroad, air travel, furniture and petrol, among other things. On the other hand, prices for hotels, for example, have fallen, as have those for gas. 

Overall, however, inflation has fallen significantly in the last three months, with economists projecting annual inflation of between 1 and 1.2%, significantly lower than December's prognosis of 1.7%. In Switzerland, too, the risk of inflation has not yet been completely overcome, but analysts expect the SNB to cut interest rates further over the course of the year. The SMI index closed 0.5% lower on Thursday at 11,209.63 points, just above the daily low.

Among individual Swiss stocks, Swisscom reported a solid result for Q1 2024: while revenue and operating profit fell slightly, net profit rose by 2.9% to CHF 455 million. However, the company's shares were punished on the market for its report and lost 2.3%. Credit Suisse was also at the centre of attention: According to media reports, the South Korean financial authorities have informed the banking giant, which was acquired by UBS last year, that it is facing 50 billion won (around CHF 33 million) in fines for allegedly violating short-selling regulations.

Elsewhere in Europe, reactions to the Fed's interest rate decision were evident on stock markets after the public holiday. Investors were hesitant, perhaps also ahead of the US labour market data due today. The Dax fell slightly (-0.2%), while the EuroStoxx 50 ended trading 0.6% lower at 4,890.61 points, just above its interim low reached around a fortnight ago. The French CAC 40 lost 0.9% and fell to 7,914.65 points, also approaching the interim low reached in mid-April.

US stock markets in turn gained new momentum on Thursday, also ahead of the monthly labour market report today (2.30 p.m.). The Dow Jones Industrial posted a gain of 0.9% and rose to 38,225.66 points, while the S&P 500 climbed 0.9% to 5,064.20 points. The Nasdaq 100 rose by 1.9 to 17,541.54 points. 

In the Asia-Pacific region, South Korea's Kospi rose 0.4%, while the Kosdaq index gained 0.3%. The weighted Taiwan index rose by 1.4% and the Hang Seng index in Hong Kong gained 2% by the end of the day. The stock exchanges in Japan and mainland China were closed for public holidays. However, the Japanese yen remained in focus. It had appreciated against the US dollar to 152.75 and it is suspected that the central bank intervened to support the currency. 

After the close of trading in the US, Apple reported that first-quarter profits exceeded market estimates. The tech heavyweight also announced a record USD 110 billion share buyback programme. Shares of the iPhone maker rose 7% in extended trading as a result, boosting related technology stocks in Asia, such as Taiwan Semiconductor Manufacturing Company (+1.8%), and Foxconn (2.6%). 

Corporate news in focus: Daimler Truck, Société Générale

Economic data in focus: EU unemployment rate; UK PMI services; non-farm payrolls, average hourly earnings and ISM non-manufacturing US

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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