UBS CEO Sergio Ermotti sharply criticized the authorities ahead of the ‚Swiss Council of States’ decision on UBS regulation. FINMA and the Swiss National Bank (SNB) share responsibility for what happened to Credit Suisse (CS), he said in an interview with the “NZZ” published Sunday evening. He described the Council of States committee’s proposal as “manageable.” According to Ermotti, the committee’s proposal would require UBS to build up approximately $13 billion in additional Tier 1 capital. The annual additional costs resulting from the CS acquisition would thus amount to $2 billion. Ermotti cited a capital requirement of 90 or 100 percent common equity tier 1 capital as the worst-case scenario. According to him, the Federal Council’s proposal would cost UBS about $3 billion annually; the 90-percent proposal would be similarly expensive. “We can live with a black eye, but two black eyes and a broken nose are too much,” Ermotti remarked. UBS is well aware of having to pay a “political price.” CS was only able to survive because FINMA granted the bank extensive concessions. And the SNB ignored the problems: Its financial stability report fails to acknowledge that CS had been in a very difficult situation since at least 2019.

The Swiss stock market saw a sharp decline at the end of the week. The SMI plummeted 1.2 percent to 13,787 points, closing at its intraday low. Sentiment was also weighed down by a significant drop in Nestlé shares, which fell 2.6 percent. The other index heavyweights, Novartis (-0.8%) and Roche (-1.2%), also posted losses. Stocks in the luxury goods sector gave up their gains from the previous day. Richemont shares declined by 1.6 percent, and Swatch shares shed 0.5 percent. Luxury goods companies should brace for persistently weak demand in China, according to Berenberg. Sandoz, on the other hand, added 1.1 percent. While the approval of a generic version of Novo’s Ozempic in Canada is positive for the Sandoz Group, it is difficult to assess how significant the boost will be for the Swiss generic drugmaker, stated Harry Sephton of RBC Capital Markets.

Europe
European stock markets pulled back on Friday. The Stoxx Europe 600 index fell 1.2% to 635.45 points and was down 0.6% for the week. In Paris, the CAC 40 and the SBF 120 each shed 1.5%. The DAX 40 fell 1.6% in Frankfurt, while the FTSE 100 dropped 1.5% in London. ORANGE (-5.8% to 15 euros): On Friday, Morgan Stanley downgraded its recommendation on the telecom operator from “neutral” to “underweight” and lowered its price target from 16.50 euros to 15 euros. SOITEC (-0.5%): The specialist in advanced materials for the semiconductor industry announced on Friday that it had issued 500 million euros in bonds with an option for redemption in cash and/or new and/or existing shares (“Ornane”). These bonds mature in September 2033. Barclays also upgraded its rating on the stock from “market weight” to “overweight.” VALLOUREC (-0.5%): The seamless pipe manufacturer confirmed Friday that it had won a contract to supply premium tubular solutions for the Prinos CO2 project in Greece. Vallourec will supply approximately 3,000 metric tons of casing pipes and accessories as part of the first phase of the project. VIRBAC (-1.3%): The veterinary pharmaceutical company reported on Thursday evening an improvement in its operating profitability for the first half of the year and confirmed its targets for fiscal year 2026.

United States
U.S. stocks were mixed on Friday as inflation and Middle East war trepidation offset optimism about the artificial-intelligence boom. The Dow Jones Industrial Average fell 95.40 points, or 0.18%, to 51682.64. Meanwhile, the S&P 500 rose 12.74 points, or 0.17%, to 7650.50 and the tech-heavy Nasdaq Composite gained 104.25 points, or 0.39%, to 26522.55. Shares of memory-chip maker SanDisk, a major beneficiary of data-center demand, rose 11% to $1791.82. Rivals such as Micron also gained. Shares of Netflix retreated 4.7% to $71.79 after analysts at Wells Fargo cut their rating on the streaming service, citing a lackluster slate of programming for the second half of the year. The analysts lowered Netflix to underweight from equal weight and cut their price target on the stock to $57 from $80. The streaming giant's rival Disney hired Karandeep Anand, the head of AI company Character.AI, to be its first ever chief technology officer, as Chief Executive Josh D'Amaro pushes the entertainment conglomerate deeper into digital territory. Warren Buffett stepped down as chairman of Berkshire Hathaway, the $1 trillion conglomerate that he has led for more than six decades, to be succeeded by his son Howard.

Asia
Against the backdrop of continuing declines in oil prices, moderate gains are prevailing on Asian stock markets as trading progresses on Monday. While the Japanese stock market is closed through Wednesday due to holidays, the technology-heavy Kospi in Seoul climbed 1.8 percent. Markets in Shanghai and Hong Kong are also advancing, each by 0.6 percent. The meeting between Trump and Chinese President Xi Jinping on Thursday in Washington is fueling a sense of optimism, particularly on the Chinese stock markets.

Bonds
U.S. government debt yields gained ground on Friday. The yield on the two-year Treasury rose 0.054 percentage point to 4.741%, its highest close since July 2024. The yield on the 10-year Treasury note added 0.049 percentage point to 4.995%, a hair's breadth from 19-year highs. The yield on the 30-year bond climbed 0.031 percentage point to 5.327%, within four basis points of a multi-year high.

Analysis
Straumann Price Target: Berenberg resumes coverage with “Buy” - Target: 118 CHF
Amrize Price Target: Jefferies lowers to 30.60 (41.40) CHF - “Hold”
Stadler Rail Price Target: UBS raises to 30 (20) CHF - “Neutral”

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