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Swiss, German, UK shares slide as SNB scraps exchange-rate cap
[FRANKFURT] Stocks in Switzerland, Germany and the UK slid as the Swiss National Bank unexpectedly announced the end of its minimum exchange rate.
The Swiss Market Index plummeted 12 percent at 12:23pm in Zurich, for its biggest decline since at least 1988. Germany's DAX Index lost 0.5 per cent and the UK's FTSE 100 Index fell 0.6 per cent. Switzerland's franc jumped to a record against the euro.
"The stock moves are a reaction to the strengthening of the currency," said Espen Furnes, who helps oversee US$85 billion at Storebrand Asset Management in Oslo.
"For international investors, the gain in the Swiss franc has tempted investors to sell and lock in profits."
The SNB gave up its minimum exchange rate of 1.20 francs per euro, ending a three-year-old policy designed to shield the economy from the euro area's sovereign-debt crisis.
The central bank also lowered the interest rate on sight deposit account balances that exceed a given exemption threshold to minus 0.75 per cent from minus 0.25.
The rally in the franc briefly caused several benchmark indexes priced in euros to surge as Swiss companies reflected the currency jump. The Stoxx Europe 600 Index showed a gain of as much as 4 per cent before paring the increase.
"The volatility is from the currency markets, so you're seeing a lot of liquidity moving the market," said Mr Furnes.
US stock-index futures fell 0.6 per cent today, reversing earlier gains.
Cie Financiere Richemont tumbled 15 per cent and Swatch Group AG dropped 16 per cent as Swiss exporters slumped in Zurich following the SNB's decision.