Swiss stocks slump on Deutsche Bank trouble

SMI

The Swiss Market Index is set to finish the week notably lower, underperforming global stocks, as financial sector stocks sell off on questions over Deutsche Bank’s solvency.

Economic Data

Global equities edged lower this week with European financials among the biggest losers after the share price of Deutsche Bank hit a 30 year low on mounting concerns about the survival of the struggling German lender. Investors dumped Deutsche Bank’s stock on worries that the financial giants capital position will be overburdened by a $14 billion fine imposed by US authorities for the banks role in misspelling mortgage-securities a decade ago. Although analysts insist that this is no Lehman Brothers situation, fears that Deutsche Bank’s troubles will spill over into other big-name European banks and threaten the whole region’s financial system have led to major sell offs across the financial sector.

In other economic news, the US economy expanded more in the second quarter than previously estimated. Gross domestic product rose at a 1.4% annualized rate, compared with a prior estimate of 1.1%. US households are doing the heavy lifting for the economy, making up for tepid business investment and lackluster demand from overseas.

Swiss Economic Data

In Switzerland reports showed that domestic consumption climbed in August on the back of a resurgence in tourism and above-average car sales. Meanwhile, employment increased modestly from the previous quarter but fell compared with the previous year. The Swiss economy grew 1% in the first half of the year.

Swiss Companies

This week financials were among the biggest losers with Credit Suisse, UBS and Julius Baer all falling on Deutsche Banks woes. Speculation amongst market players that Germany’s biggest bank could need a state rescue has led investors to sell stocks across the whole financial sector.