The Swiss National Bank’s decision to de-peg the Swiss franc from the euro exacted double-digit damage on the shares of Swiss exporters Compagnie Financière Richemont and The Swatch Group and applied downward pressure on European and U.S. stocks.
The unexpected move, accompanied by a reduction in Swiss interest rates, pressured the euro, which fell about a third to 0.81 euros before recovering to 1.04 euros, and sent Swiss stocks down about 9 percent. In Paris, the CAC 40 fell 2.4 percent to 4,323.20 while Frankfurt’s DAX pulled by 2.2 percent to 10,032.20.
Swatch had the largest decline, and Richemont the second largest, among the 100 component stocks of the WWD Global Stock Tracker, which was off 0.2 percent to 107.86 on the day. Swatch was down 16.4 percent to 382.30 Swiss francs, or $375.30 at current exchange, while Richemont declined 15.5 percent to 74.95 Swiss francs, or $73.58.
The move in Zurich and resulting rise in the Swiss franc will elevate the price of Swiss exports while effectively lowering prices of items imported by Switzerland from its trading partners in Europe and elsewhere. A key area of concern is the Swiss luxury watch sector, which already was under pressure because of declining sales in China due to the Chinese government’s anti-corruption campaign.
Swatch chief executive Nick Hayek described the Swiss bank’s action as a “tsunami, for the export industry and for tourism and finally for the entire country.”
U.S. equities fared only somewhat better. The Dow Jones Industrial Average was off 0.6 percent to 17,320.71 and the S&P 500 down 0.9 percent to 1,992.67, once again failing to hold the 2,000 mark. The S&P 500 Retailing Industry Group was hit hard, dropping 1.9 percent to 971.82.
After the declines at Swatch and Richemont, the largest descent of the day came from Movado Group Inc., down 11.3 percent to $23.50, followed by Vince Holding Corp. (down 6 percent to $23.29) and J.C. Penney Co. Inc. (down 5.2 percent to $7.72). A large group of U.S.-based retailers, including Abercrombie & Fitch Co., American Eagle Outfitters, Dillard’s Inc., Macy’s Inc. and Ann Inc., had declines of between 5.1 percent, in Abercrombie’s case, to 3 percent, at Ann Inc.
Target was one of only a handful of retailers to record gains in its shares after it said it would shutter its struggling 133-unit Canadian operations, recording about $5.4 billion of pretax losses in the fourth quarter. It also reported that comparable sales for the quarter should rise 3 percent, better than prior guidance of 2 cents, based on improved traffic and e-commerce results. It raised earnings guidance for the quarter accordingly.
However, Target’s 1.8 percent share gain, to $75.67, didn’t make the cut for the best advances of the day among tracker stocks, and neither did any of the other U.S.-based equities on the WWD list.
The best performance of the day came from Isetan Mitsukoshi Holdings Ltd., up 4.9 percent to 1,533 yen, or $13,07, followed by L’Oréal SA, up 3.2 percent to 146.10 euros, or $172.25, and Youngor Group Co., up 2.9 percent to 11.63 yuan, or $1.88.
Kering rose 2.6 percent to 166.75 euros, or $196.59; Yoox.com increased 2.5 percent to 16.97 euros, and Fast Retailing Co. was up 2.4 percent to 42,945 yen, or $366.