Swiss stocks outperform as Fed rate rise brings volatility to markets

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Swiss stocks outperformed global equity markets in a week of volatile trading after the Federal Reserve finally raised US interest rates for the first time in a decade on Wednesday. The decision by the FOMC to raise rates by 0.25% to 0.50% for the first time since 2006 draws to a close an unprecedented period of record-low rates and begins a period of diverging monetary policy between Europe and the US.

Stocks markets around the world initially rallied on the move, reversing the week’s early losses, after Federal Reserve Chair Janet Yellen reassured investors that, although the U.S. economy is performing well, the central bank is in no rush to raise interest rates again any time soon. The Swiss National Bank however warned last week that diverging monetary policy between Europe and the US created “huge challenges” for the Swiss economy as domestic growth and inflation continue to slow.

Nevertheless, the State Secretariat for Economic Affairs said this week that economic momentum in Switzerland is set to pick up over the next two years, as the global economy gradually improves. According to the government report, gross domestic product will expand 1.5 percent in 2016 and 1.9 percent in 2017, from 0.8 percent in 2015. The SECO does however expect tough times ahead for export-oriented industries hit by a strong Swiss franc and sees the unemployment rate climbing to 3.6 percent in 2016 from 3.3 percent this year.

In company news, Zurich Insurance Group AG announced this morning that it had agreed to buy a Wells Fargo & Co. crop insurance business for as much as $1.05 billion. The Swiss company is set to fund the deal with excess cash left over from its abandoned takeover of RSA Insurance Group Plc in September this year.

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