What will happen next is very difficult to assess, and this lack of visibility is the very reason why markets should remain very volatile and unpredictable over the months to come.
Politics will outshine market fundamentals, where the UK and the EU will enter into long and complex negotiations.
Nothing surprising came out of this SNB meeting. The increase in the oil price is the main explanation of the upward revision of the inflation outlook. However, the effects of oil are short-termed. In a couple of months, this should disappear. The SNB sounds a bit too optimistic, in our view, on the US and European outlook, which will be also key to its monetary policy. Things might be slower than what the SNB displays.
Similarly to the Scottish independence referendum in 2014, markets are starting to get nervous two weeks from the Brexit vote. A single poll by an independent newspaper showing 55% in favour of Brexit, was enough to spur doubt among investors. The volatility on European markets spiked up and oil fell 3% last Friday. The EUR/CHF is also particularly affected with 1 month implied volatility reaching the highest level since the summer of last year.
The SNB foreign currency reserves came out this morning. They were significantly higher than the previous month (602.1bn vs 587.6bn CHF). This is the highest number ever for the SNB, which keeps increasing its reserves since early 2009 and dramatically accelerated since 2012. This shows what, intuitively, we thought: the SNB is still intervening massively to stabilize the EURCHF exchange rate, which is trapped in the 1.10-1.11 range since late April, and almost always above 1.09 since January. And this is not going to stop.
This morning the Swiss Consumer Price Index came out in line with the analysts’ expectations (0.1% vs 0.2% expected MoM and -0.4% vs -0.4% expected YoY). The figure is, in absolute value, very low and comparatively, it is located in the average of what we experienced since 2010. This does confirm what we explained with the Foreign Currency Reserves, which was the highest number ever for the SNB.
The proposal was rejected by an overwhelming majority, with a percentage of 78%. So the Swiss have expressed a clear denial, as had clearly foreseen by the polls. Even the government was opposed to the excessive spending that would entail. The proposal for a "citizen’s income" equal for all was launched by Daniel Haeni, owner of Coffee Basel, and a group of his allies who call themselves independent, but showed from the outset to have little chance of being approved despite the interest he had aroused in public opinion Swiss. In addition, for approval it would be needed a double majority, that of the "cantons" and that of voting.
The American Federal authorities guarantee of bank deposits has announced today that it has concluded an agreement with eight financial institutions, including UBS and Credit Suisse, which concerns a total of $ 190 million (188 million francs).
The agreement puts an end to a series of disputes about the sale of securities related to real estate loans of the former Countrywide Financial. In a statement the Federal Deposit Insurance Corp (FDIC) states that the agreement was signed with UBS, Credit Suisse, Barclays, BNP Paribas, Deutsche Bank, Edward D. Jones & Co., Goldman Sachs and Royal Bank of Scotland.
Credit Suisse will issue 75.5 million new shares to finance the optional dividend paid for the year 2015. The increase represents 3.8% of the current share capital. The price was fixed at 12.47 francs per title.
Shareholders have exercised almost 1.3 million option rights in favor of a dividend in the form of new shares. Yesterday it was the last day to choose the payment method, like a today’s press release mentions.
The issue price was calculated on the basis of the reference price of the shares Credit Suisse, or 13.86 francs, less 10%. The distribution will take place on June 6th.
