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Swiss inflation falls slightly

The inflation rate in Switzerland slipped slightly in June. While the deceleration was mild, it appeared to justify last month’s interest rate cut by the Swiss National Bank (SNB). European equity markets rallied on Thursday, while Asian stocks were mostly in the red to finish the week. Trading resumes normally in New York today after US markets were closed on Thursday for a public holiday. In politics, the Labour party won enough votes in Britain’s general election on Thursday to form a majority government.

Shane Strowmatt, LGT
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Swiss francs
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The Swiss Consumer Price Index (CPI) increased 1.3% in June when compared to a year earlier, down a bit from May’s 1.4% rise. Falling prices for airfare, petrol and some clothing items contributed to the deceleration. Inflation has been trending lower from a peak of 3.5% in the summer of 2022, falling back within the SNB’s target range of between 0% and 2% in June 2023. In response, the SNB began cutting rates this year and last month became the first of the world’s major central banks to cut rates at two consecutive policy meetings during the current cycle. The SNB justified the second interest rate cut citing easing inflation compared with the previous quarter and the continued slowing space of price increases in June appear to justify the decision. In other macroeconomic data out of Switzerland, the unemployment rate remained stable at 2.3% during the month of June with the total number of unemployed people falling by 947 at a national level during the month.

The Swiss franc initially fell somewhat versus the world’s major currencies after the release of the Thursday’s inflation data, but recovered most of its losses by later in the day. Friday, the franc was trading above 1.11 versus the dollar and below 1.03 versus the euro.

Switzerland monitoring UBS prices after Credit Suisse deal

Switzerland's consumer pricing watchdog has begun watching UBS product prices following its acquisition of Credit Suisse as authorities are concerned about the enlarged bank's market power potentially resulting in higher charges for customers in Switzerland due to UBS’s size in some sectors, according to news reports. UBS stock gained 0.4%, while Switzerland’s SMI stock index closed 0.6% higher on Thursday.

German industrial orders fall

Industrial orders in Germany declined in May, marking the fifth consecutive monthly drop and indicating a lack of recovery in the country's manufacturing sector. Orders fell by 1.6% compared to the previous month. Analysts had expected orders to increase. Falling industrial orders, coupled with a deepening contraction of the Manufacturing Purchasing Managers’ Index (43.5 in June), suggest a subdued industrial sector in Europe’s largest economy in the coming months, with stabilisation only likely as global trade improves. The Euro Stoxx 50 closed 0.5% higher on Thursday and Germany’s DAX gained 0.4%.

Japanese stocks fail to hold new high

In the Asia-Pacific region, stock markets were mostly trading in negative territory to finish the week. In Tokyo, the Nikkei 225 was down 0.3% after breaking out into new all-time highs earlier in the session. Weak household spending data, which was down 1.8% on the year in May in real terms, pressured sentiment in Japan. Household spending is closely watched by the Bank of Japan. South Korea was the only major equity market in the region to make gains on Friday. The Kospi was trading more than 1% higher, driven by electronics giant Samsung, which was up about 2.5% after the company estimated that profit would increase 15-fold in the three months to June, when compared with the same period last year, due to demand for AI-related chips. In Australia, the S&P/ASX 200 lost 0.3%. Hong Kong's Hang Seng Index was trading 1% lower, while the CSI 300 was down 0.7%.

Corporate and macroeconomic calendars

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: German industrial production, euro-area retail sales, US employment report, Canadian unemployment rate.

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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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