European Market Trends: Stoxx 600, FTSE, DAX, and CAC Insights

Twenty percent of Switzerland’s watch and jewelry production is sold abroad to the U.S. However, analysts from the Swiss asset management firm Vontobel suggest that the impact of recent tariffs will not be felt equally across the market.

Mark Diethelm, Vontobel’s senior equity analyst, indicated on August 4 that “the lower end of the watch segment is likely to be more significantly impacted by the tariffs.” Additionally, he pointed out that machinery and tools suppliers, with around 15% of their exports going to the U.S., will also face challenges.

These specialized tools and machinery are typically produced by small companies experiencing a range of issues, including diminishing demand in Europe and China, a stronger Swiss franc, and reduced tariffs on imports from Europe and Japan. Diethelm referred to this situation as a “highly toxic cocktail.”

Despite these challenges, he expressed cautious optimism about potential negotiations with the U.S. “There is some hope for an agreement that could bring tariff levels closer to the 15% baseline set for other countries,” he noted, stressing the importance of reducing the current 39% tariff, which could severely affect profits and drive companies out of Switzerland.

— Ganesh Rao

As the Swiss markets opened after a public holiday, the blue-chip SMI index saw losses trimmed to approximately 1.5%, reflecting investor concerns surrounding new U.S. tariffs. The broader Swiss All Share Index mirrored this decline.

Gianluigi Mandruzzato, a senior economist at EFG Asset Management, warned that the risk of a Swiss recession has escalated, stating that U.S. export tariffs could impact about 10% of the economy. Furthermore, these tariffs could create deflationary pressures, further complicating the Swiss National Bank’s efforts, especially given its current zero interest rate policy.

Time is running short for the Swiss government to negotiate a better tariff agreement ahead of the August 7 deadline, with Mandruzzato suggesting that strategies may include increasing U.S. energy purchases or boosting Swiss investments in the U.S.

The UK’s Financial Conduct Authority suggests that lenders may face compensation costs nearing £18 billion ($23.9 billion) due to a new redress scheme for mis-sold car loans. The Supreme Court’s recent ruling overturned an earlier decision that could have resulted in significant liabilities for banks like Lloyds, Barclays, and Close Brothers. This ruling catalyzed a drop in their stock prices and prompted these firms to set aside considerable funds for potential payouts.

The FCA announced plans for an industry-wide compensation program to be consulted on, possibly starting in 2026, with estimated costs ranging from £9 billion to £18 billion, where most affected individuals could receive less than £950 in compensation.

Following the alarming announcement of a 39% U.S. tariff effective August 7, traders are closely monitoring Swiss stocks. Reports indicate that the Swiss Federal Council is convening as business minister Guy Parmelin has suggested that the country is open to modifying its trade offer to the U.S.

Additionally, Swiss President Karin Keller-Sutter is facing blame domestically after a phone call with her U.S. counterpart did not avert this substantial levy, with watchmakers and machinery producers being among those hit hardest by these changes.