Publications
Partners
London - Europe's main stock markets rose on Thursday but Swiss equities sank after Switzerland's central bank scrapped a policy to artificially hold down the value of its currency against the euro, sending the franc soaring.
The Swiss franc, seen as a safe haven investment, soared 29% against the European single currency after the central bank said it was discontinuing the minimum exchange rate of 1.20 francs per euro after three years.
The franc, which bought a euro for 1.2010 late on Wednesday, reached 0.8517 on Thursday. That was a record high and the first time that the franc had gone beyond parity with the euro since the birth of the single currency in 1999. It later lost steam to trade at 1.0298 francs against the euro.
With Switzerland's economy heavily dependent on exports, investors feared that a strong franc could dent earnings at Swiss companies and dumped their stocks, sending the Swiss Market Index tumbling 10.29% to 8 252.12 points in afternoon trading.
"I am at a loss for words," Swatch group's boss Nick Hayek told news agency ATS. "What the SNB has sparked here is a tsunami."
The Swiss watch making giant was among top losers on the stock market, with its shares sinking nearly 17% in afternoon trade while those of the world's second largest luxury group Richemont plummeted more than 16%.
Euro falls, stocks jump
The euro also fell to an 11-year low against the dollar on Thursday, with the single currency hampered by the prospect of fresh stimulus from the European Central Bank to tackle deflation threats at its next policy meeting on January 22.
But stimulus hopes boosted European shares as Frankfurt's DAX 30 rose 1.54% to 9 967.84 points and the CAC 40 in Paris climbed 1.96% to 4 306.09.
London's benchmark FTSE 100 index was up 1.08% to 6 457.51 in afternoon deals.
European stocks had opened mixed after "the totally unexpected decision by the Swiss central bank touched off risk aversion movement," said Alexandre Baradez an analyst at IG France.
"But quickly the decision reinforced the expectations about the European Central Bank, with investors figuring that the Swiss central bank had acted as such in anticipation of an eventual intervention by the BCE next week," he added.
Europe's indices had fallen sharply on Wednesday, with London slumping 2.35%, as deflation fears swept across the region. Tumbling commodity prices had also put pressure on miners and energy companies, sending their shares crashing. Both sectors were steadier in Thursday trading.
Wall Street shares opened slightly lower on Thursday after the Swiss bank's move with the Dow Jones Industrial Average off 0.22% at 17 388.27 points.
The S&P 500 index lost 0.22% to 2 006.75, which the tech-rich Nasdaq Composite Index lost 0.40% to stand at 4 620.94.
The euro slid to an 11-year low against the dollar at $1.1575. It later recovered to $1.1642, still down from $1.1782 on Wednesday.
