Swiss Market Ends Sharply Lower After SNB's Unexpected Interest Rate Hike

(RTTNews) - The Switzerland stock market ended sharply lower on Thursday, in line with markets across Europe, as rate hike announcement by central banks triggered recession fears and rendered the mood extremely bearish.

The Swiss National Bank (SNB) today raised its key interest rates unexpectedly for the first time since 2007, joining its peers in the battle against runaway inflation.

The benchmark SMI ended with a loss of 308.22 points or 2.86% at 10,475.37.

All the components of the SMI and the Mid Price Index ended in negative territory with sharp losses.

Swiss Life Holding, UBS Group, Logitech, Alcon, Credit Suisse, Swiss Re, Lonza Group, ABB, Sika, Holcim Group and Partners Group lost 4 to 6.5%.

Geberit, Richemont, Zurich Insurance Group, SGS and Novartis shed 2 to 4%. Roche Holding ended lower by about 1.4% after the Swiss drug maker announced a setback in the development of its crenezumab drug for the treatment of Alzheimer's disease.

In the Swiss Mid Price Index, AMS tanked 9.25%. Sonova, Dufry, Zur Rose, Galenica Sante, Swiss Prime Site and BB Biotech lost 7 to 9%.

Georg Fischer ended 6.4% down, while Straumann Holding, Julius Baer, SIG Combibloc, Lindt & Spruengli, Temenos Group, VAT Group and Ems Chemie Holding closed lower by 4 to 6%.

The SNB raised its policy rate and the interest rate on slight deposits at the SNB by half a percentage points to -0.25% from -0.75%.

"It cannot be ruled out that further increases in the SNB policy rate will be necessary in the foreseeable future to stabilize inflation in the range consistent with price stability over the medium term," the bank said in the statement.

The SNB raised its inflation forecast, citing global factors. The inflation projection for this year was raised to 2.8% from 2.1%. Similarly, the forecast for 2023 was lifted to 1.9% and that for 2024 to 1.6%, from 0.9% estimated for both 2023 and 2024.

The SNB's surprise move came after the major central banks around the globe moved towards tightening. The U.S. Federal Reserve on Wednesday raised the target rate for the federal funds rate by 75 basis points to 1.5% to 1.75%, which was the biggest rate hike since 1994.

The Bank of England today raised its key rates by 25 basis points. The ECB last week announced its intention to hike the rate by a quarter point in July.