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SNB interest rate decision takes centre stage

The Swiss National Bank (SNB) will announce its monetary policy decision at 9:30 a.m. (CET) this morning. Capital markets are largely expecting a further interest rate cut of 25 basis points. Sweden's central bank already made another interest rate move yesterday and held out the prospect of further easing. Following a significant downturn in US consumer sentiment, the Dow Jones Industrial and the S&P 500 fell slightly on Wednesday, just failing to cross the finish line of the record highs reached at the beginning of the trading day. In Asia, China's economic stimulus measures on Thursday created a positive stock market environment. 

Date
Author
Alessandro Fezzi, LGT Research Content & Publications
Reading time
5 minutes

SNB with Swiss flag
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In March, the SNB became the first major central bank in the West to initiate a turnaround in interest rates by lowering them. After a further easing in June, the third interest rate move is likely to be on the cards today. This will also be the last monetary policy decision taken by SNB Chairman Thomas Jordan. The big question is how big the interest rate move will be this time. The comparatively low inflation in Switzerland - the inflation rate in August was 1.1% - should give the SNB sufficient leeway for monetary easing. In addition, the Swiss Economic Institute (KOF) at ETH Zurich has just lowered its GDP forecasts for both the current and the coming year. The consensus is for a ‘normal’ easing of 25 basis points. However, since the Fed's more pronounced than expected interest rate turnaround, some market observers are predicting a more substantial easing by the SNB of 50 basis points, particularly to prevent a further appreciation of the Swiss franc. Consequently, the interest rate announcement at 10:00 a.m. is eagerly awaited.

Sweden's central bank eases further 

As expected, the Swedish Riksbank cut its key interest rate for a third time by a further 25 basis points to 3.25%. In its outlook, the central bank also signalled its willingness to ease monetary policy further - according to the Riksbank, possibly also in larger steps - as long as the outlook for inflation and the economy remains unchanged. In August, the inflation rate in Sweden fell back to 1.9% from 2.6% in July.

Wall Street posts further records

On the New York Stock Exchange, the stock indices closed unevenly at midweek. Although the Dow Jones Industrial reached another record high, it then turned negative and ended the session at 41,914.75 points, 0.7% lower. The S&P 500 also climbed to a new high before closing 0.2% lower at 5722.26 points. By contrast, the Nasdaq indices gained 0.1% yesterday. Among the individual stocks, the carmakers were particularly noticeable. Shares in General Motors (GM) and Ford fell by 4-5% after Morgan Stanley issued a negative report on the sector. At the other end of the spectrum, Micron Technology's shares gained more than 10% in after-hours trading after the Nvidia competitor presented better-than-expected results.

On the bond market, the yield on ten-year US government bonds climbed to 3.79%. In currency trading, the US dollar pushed the euro back below the 1.12 mark. The background to this was better-than-expected data from the US real estate market.

China's economic stimulus package creates a positive stock market environment in Asia

Stock markets in the Asia-Pacific region rose on Thursday, with the region's stock markets led by the Hang Seng Index in Hong Kong and the markets in mainland China expanding their gains. The Hang Seng Index in Hong Kong rose by 3%, reaching its highest level since May. The CSI 300 in mainland China extended its winning streak to seven days, touching on its highest level in almost two months after the Chinese central bank introduced a series of stimulus measures on Tuesday. The index rose 1.6%. In Tokyo, the Nikkei rose 2.5%, while the broad-based Topix gained 2.2%. South Korea's Kospi rose 2.4%, boosted by gains in chipmaker SK Hynix, which rose over 8%, while the small-cap Kosdaq traded 2.2% higher. Australia's S&P/ASX 200 rose 1%.

Corporate and economic calendar

Corporate news in focus: H&M Q3, Accenture und Costco Q4.

Economic data in focus: GfK consumer climate in Germany, SNB interest rate decision Switzerland, ECB President Lagarde and Fed Chairman Powell speaks. Initial jobless claims, GDP data, new durable goods orders, pending home sales USA.
 

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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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