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SNB increases minimum reserve requirements, Europe's stock markets cautiously optimistic

The Swiss National Bank increases its minimum reserve requirements for banks and is expected to report a record result. Meanwhile, European markets are likely to open higher on Tuesday after developing positive momentum in the previous session.

Antonia Strachwitz, LGT
Reading time
5 minutes
SNB with Swiss flag
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The Swiss National Bank (SNB) announced on Monday that it is increasing the minimum reserve requirements for domestic banks and amending the National Bank Ordinance accordingly as of 1 July 2024. The new ordinance ends the exemption rule that only 20% of liabilities from callable customer deposits (excluding tied pension assets) must be taken into account when calculating the minimum reserve requirements. The SNB is also raising the minimum reserve ratio from 2.5% to 4%. The banks' sight deposits, which are required to fulfil the minimum reserve requirement, do not earn interest, which reduces the interest expense for the SNB. In 2023, the SNB posted a loss of CHF 8.5 billion on its Swiss franc positions, almost 90% of which came from interest on banks' sight deposits. In Q1 2024, the SNB is also likely to have posted a record result, driven by the weak franc, positive developments on stock markets and the higher gold price. According to forecasts, there was a profit of between CHF 50 and 60 billion.

According to the German Bundesbank's monthly report for April, real gross domestic product in Germany increased slightly in Q1 2024. There is still no sign of a sustained improvement in the German economy and it remains unclear whether economic output will also increase in the second quarter. However, business sentiment has improved significantly and consumer prices also fell in March compared to the previous year. The core inflation rate fell to 3.2% and thus remains above average.

According to a preliminary report by the European Commission, the consumer confidence indicator in the eurozone improved slightly in April, rising by 0.2 percentage points to -14.7. European stock markets stabilised somewhat at the beginning of the week after a weak April to date. The EuroStoxx 50 closed 0.4% higher at 4936.85 points, while the French CAC 40 rose by 0.2% to 8040.36 points. The euro was last quoted at USD 1.07 in New York trading, slightly above Friday evening's level. At CHF 0.97, the euro is also above its pre-weekend level against the Swiss franc.

Investors on the New York stock exchanges were more confident again on Monday ahead of this week's expected quarterly figures from major tech companies. The results from Meta, Alphabet and Microsoft are being eagerly awaited. Sentiment has also improved due to the emerging de-escalation in the conflict between Israel and Iran. Prices trended positively over the course of the day. The Nasdaq 100 rose by about 1% to 17,210.89 points, while the S&P 500 followed with an increase of 0.9% to 5010.60 points. The Dow Jones Industrial in turn gained 0.7% and ended at 38 239.98 points. Nvidia shares in particular have so far followed the recovery on the Nasdaq and were able to recover 4.4% after a 10% slump on Friday. In the Dow, JPMorgan and Goldman Sachs in particular have shown strength and gained up to 3.3%, while Verizon lost 4.7%.

Tesla's figures will also be eagerly awaited after the close of trading today. The shares fell 3.4% at the start of the week, dropping to their lowest level in 15 months. The electric car manufacturer recently lowered prices in order to increase demand. Ford and General Motors, on the other hand, recorded increases of up to 6%.

In Asia, the markets extended their gains from Monday. Investors looked to economic data from Australia, Japan and India. The Australian Purchasing Managers Index reached a two-year high of 53.6 compared to 53.3 in March. The S&P/ASX 200 started the day boosted by this with a gain of 0.4%. The PMI figures from Japan and India will be published today. The Nikkei 225 gained 0.2%, while the Topix rose 0.2%. South Korea's Kospi climbed 0.1% and the small-cap Kosdaq index rose 0.4%. The Hang Seng index in Hong Kong opened 0.9% higher, while the CSI 300 on the Chinese mainland was the exception with a fall of 0.2%.

Corporate news in focus: Deutsche Börse, NextEra Energy, Novartis, PepsiCo Tesla, Visa

Economic data in focus: PMI Japan, PMI Germany, PMI Eurozone, PMI UK, PMI USA

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Lten steht Ihnen ein Berater der Bank gerne zur Verfügung.

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