European markets open to close, BOE and SNB rate decisions

The Swiss franc weakened dramatically against the US dollar, euro and sterling after the central bank decided to hike interest rates by 75 basis points to 0.5%.

As of 9:30 am London time, the dollar was up 0.9% against the Swiss currency, while the euro and sterling were each around 1.4% higher against the franc.

Earlier this week, the Swiss franc hit its strongest level against the euro since January 2015, when economists began speculating on the prospect of a 75 basis point hike.

– Hannah Ward-Glenton

Norway’s central bank raised its interest rate to 2.25% from 1.75% and said it plans to hike further later this year.

There are “clear signs of a slowing economy,” Norges Bank said in a statement, and “easing pressure on the economy will help contain inflation further.”

Based on the current assessment of the monetary policy committee, according to the bank, the key interest rate will in all probability be raised further in November.

– Hannah Ward-Glenton

The Swiss National Bank has its key interest rate up 0.5%, a shift that ends an era of negative interest rates in Europe.

The 75 basis point hike follows a hike to -0.25% on June 16, the first rate hike in 15 years. The Swiss central bank had previously kept interest rates constant at -0.75% since 2015.

Inflation in Switzerland is currently at its highest level in three decades, reaching 3.5% last month.

– Hannah Ward-Glenton

Italy’s voters will go to the polls on Sunday in snap general elections that are likely to see a government led by a far-right party come to power.

If that happens, it will mean massive political change for a country already grappling with persistent economic and political instability.

Polls before September 9 (when a blackout period began) showed that a right-wing coalition could easily win a majority of seats in the slimmed-down lower and upper houses of parliament.

The coalition is led by Giorgia Meloni’s far-right Fratelli d’Italia (Brothers of Italy) and includes three other right-wing parties: the Lega led by Matteo Salvini, Silvio Berlusconi’s Forza Italia and a smaller coalition partner, Noi Moderati.

The Brothers of Italy party stands out from the crowd and is expected to receive the largest share of the vote for any single party. According to poll aggregator Politiche 2022, she has garnered nearly 25% of the vote, well ahead of her closest right-wing ally Lega, who are expected to garner around 12% of the vote.

Read more about the upcoming election here

— Holly Ellyatt

Fortum shares rose again in early trade on Thursday after the Finnish company agreed to sell its 56% stake in German utility Uniper to the German government. The state-owned energy company shifted its shares as part of a nationalization agreement.

French hospitality company Accor saw its shares fall 6.3% in market open after JP Morgan downgraded its rating on the stock to underweight from neutral. The investment bank expressed concerns that the group would not be able to return to its previous level of profitability, saying: “Our concerns have now outweighed the reasons we like.”

– Hannah Ward-Glenton

According to the Financial Times, Credit Suisse plans to split its investment bank into three parts.

The Swiss lender wants its own “bad bank” exclusively for risky assets to recover from several years of scandals and missteps.

New proposals suggest that Credit Suisse will sell some of its profitable units as part of the sweeping restructuring, with full plans expected to be announced at the bank’s third-quarter results on Oct. 27, the FT reported.

– Hannah Ward-Glenton

Oil prices rose after the Fed raised interest rates for the third time in a row.

Reuters also reported that Chinese refiners expect the country to release up to 15 million tons worth of oil product export quotas for the remainder of the year, citing people familiar with the matter.

Brent crude futures rose 0.45% to $90.24 a barrel, while US West Texas Intermediate also rose 0.45% to $83.3 a barrel.

— Lee Ying Shan

According to Tai Hui, chief APAC market strategist at JPMorgan Asset Management, Asian risk assets, particularly export-oriented companies, will remain under pressure in the near term following the Fed’s rate hike.

Tai added that a strong US dollar is likely to continue, but monetary tightening in most Asian central banks – with the exception of China and Japan – should help limit the extent of Asian currency depreciation.

The US Dollar Index, which tracks the greenback against a basket of its peers, rose sharply to last trade at 111.697.

– Abigail Ng

Equity markets are down but the fund managed by Patrick Armstrong at Plurimi Wealth continues to deliver positive returns. The fund manager holds a number of short positions to play around with market volatility.

Pro subscribers can read more here.

– Zavier Ong

Morgan Stanley’s Mike Wilson remains defensive amid continued market volatility this year. He names the key attribute he looks for in stocks.

Stocks with this attribute have been “rewarded” this year, with the trend likely to continue until the market turns more bullish, Wilson said.

Pro subscribers can read more here.

– Zavier Ong

European stocks are expected to open in negative territory on Wednesday as investors react to the latest US inflation data.

According to data from IG, the UK FTSE index is expected to open 47 points lower at 7,341, the German DAX 86 points lower at 13,106, the French CAC 40 28 points and the Italian FTSE MIB 132 points lower at 22,010.

Global markets retreated after a higher-than-expected U.S. CPI report for August, which showed prices rose 0.1% for the month and 8.3% annually in August, the Bureau of Labor Statistics reported on Tuesday, defying economists’ expectations that inflation would fall 0.1% on a monthly basis.

The core CPI, which excludes volatile food and energy costs, is up 0.6% since July and 6.3% since August 2021.

UK inflation figures for August are due and July euro-zone industrial production to be released.

— Holly Ellyatt