Analysts were predicting a minus 3.3% change in PPI for Switzerland, the worse since 2009: Lower figure plunges stocks.
The Swiss20 index that tracks the performance of the 20 largest and most liquid stocks based in the Swiss Exchange, making up 85% of the Swiss equity market, felt the pressure of expectation on factory output prices on Monday morning. However, the figure was worse than predicted at actual -3.6% compared to -2.7% previous month. The monthly figure is for year on year and recorded the largest negative reading since November 2009.
In response to forward expectations, the Swiss 20 fell by 1.5% in a reverse move from the steady gains that Swiss companies have made since the crash of the CHF on 15 January when the Swiss Central Bank broke the bond between the franc and the euro catapulting CHF up by 15% against a basket of currencies. Since February the Swiss franc has got weaker against the euro, but is still seen as ‘overweight’.
The Producer Price Index (PPI) is a leading indicator of consumer price inflation, accounting for the majority of overall inflation. A fall in PPI tends to effect consumer confidence and the figure reported Monday morning regarding January’s Retail Sales, year on year, attests to this correlation with sales down by 0.3%, versus an expectation of +2.6% and previous of +1.9%.
The month on month figure for PPI will be the deciding factor for currency movement with Monday’s figure for January at -1.4% versus a more positive expectation of 0.4% and well below the previous figure of -0.6%.
Currently sitting on a negative interest rate of -0.75%, The Swiss National Bank have a meeting planned this Thursday to discuss any hike in the rate. However, Bloomberg News reports 21 of 26 economists surveyed (survey taken March 6-13) predicting that the rate will remain the same, and that 15 economists see SNB avoiding further cut for rest of 2015.
MT4 Chart: Swiss20
Trade indices CFDs on STOCK.com with full training given to all clients