Markets Sell-off on the stock markets continues

The international financial markets started the new trading week in deep red. This means that the correction of the last few trading days has continued, including on the Swiss market. Concerns about a recession in the USA are causing investors to panic.

In the end, the leading Swiss index SMI fell by 2.8% to 11,543.25 points on Monday. The last time it traded at this level was at the beginning of May. On Friday, the SMI had fallen by as much as 3.6 percent. The last time such a large daily loss was recorded was in January 2022.

The downward trend continued not only on the Swiss stock exchange, but also on important European indices such as the DAX in Frankfurt (-2.6%) and the FTSE100 in London (-2.0%). In the USA, the Dow Jones closed 2.5% lower in Europe, while in Tokyo the Nikkei index had already caused quite a stir in the morning with a drop of around 12%.

Concerns about the US economy

The rapid deterioration in US economic data triggered the downturn on stock markets worldwide. From the second half of the week onwards, these data have conjured up fears of recession in the USA, which have led to a broad-based sell-off on the stock markets. This was typified by the deteriorating situation on the otherwise robust US labor market.

The fact that US Fed Chairman Jerome Powell signaled a turnaround in interest rates for September last Wednesday has hardly helped so far. Cautionary voices are wondering whether the US Federal Reserve might not be waiting too long to cut interest rates. This is giving rise to speculation about an interest rate hike of 50 basis points instead of just 25 at the Fed's upcoming interest rate meeting.

On Wall Street, the big technology stocks in particular are suffering from the recession worries. They were the driving force behind the record-breaking run of recent weeks and months and are now being shunned. AI chip manufacturer Nvidia, for example, lost 14% on Monday, and its shares were still down 5.0% at the end of the day.

In Switzerland, insurers such as Swiss Re (-4.2%) and Swiss Life (-3.5%) were under increased selling pressure at the start of the week. However, pharmaceutical heavyweights Roche (non-voting equity security: -4.0%) and Novartis (-3.3%), which are classified as defensive, also fell sharply in value. Growth stocks such as Straumann, Holcim and Richemont also lost more than 2.5%.

Swiss franc as a safe haven

When uncertainty on the financial markets increases, investors tend to flee to the "safe haven" of the Swiss franc. On Monday, the Swiss franc made further strong gains against the euro and the US dollar. At 0.9211 francs, the euro was at its lowest since January 2015, when the Swiss National Bank (SNB) lifted the minimum exchange rate against the euro.

Currently, one euro still only costs CHF 0.9345, while the dollar is trading at CHF 0.8527 to the franc. Before the slump, the US currency had been trending above the 88 centime mark. In addition to the uncertain economic situation in the USA and the expected reduction in interest rates, increasing tensions in the Middle East are also seen as the driving force behind the franc's strength.