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Europe in shellshock after SNB move

Friday, January 16, 2015 - 02:27

European markets are still reeling from Switzerland's move to scrap its currency cap. As David Pollard reports, they're not the only ones. Swiss exporters, hedge fund speculators and holders of Swiss debt abroad are among those counting the cost of the shock decision.

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The bombshell went off here. Its shockwaves are being felt here. Warsaw is around 1500 kilometres from the Swiss National Bank. But huge numbers of Polish homeowners have Swiss franc mortgages. An estimated thirty-six billion dollars worth - nearly eight per cent of GDP. Paying that debt back in local zlotys is now a whole lot harder. property analyst, Marcin Krason. (SOUNDBITE) (Polish) REAL ESTATE MARKET ANALYST, MARCIN KRASON, SAYING: "Five hundred and sixty thousand people have taken this risk, they agreed to it. They paid very low installments for a few years, but now worse times have arrived." Thursday's decision to dump the franc's currency cap is spreading pain. European markets watched as Swiss shares headed for another day deep in the red. That's after a massive fall the day before. Global currency speculators who shorted the franc are staring huge losses in the face. An estimated three and half billion dollars betting on more franc weakness. What they've got is a franc that rose more than 15 per cent against the euro. Jeremy Batstone-Carr from Charles Stanley. SOUNDBITE (English) JEREMY BATSTONE-CARR, CHARLES STANLEY, SAYING: ''All currency moves are adjustment factors, so therefore there will be winners and losers. The obvious winner will be euro zone manufacturing, one imagines because the euro will weaken on foreign exports. The obvious loser will be the Swiss export sector.'' Luxury goods makers and other exporters are furious. Watchmaker H Moser said the move may force some to call time on their exclusive products. Tourism too: Switzerland losing some its fairytale charm thanks to even pricier prices. Although it's less likely to dampen spending at next week's meeting of the rich and powerful at Davos. Where they'll no doubt chew over the shock decision. SOUNDBITE (English) JEREMY BATSTONE-CARR, CHARLES STANLEY, SAYING: ''The timing is hugely interesting, insofar as it comes the day after the European Court of Justice preliminary ruling, which tends to validate the Outright Monetary Transactions Programme as yet unused for the purchase of euro zone sovereign bonds.'' There are winners. German bond yields at record lows. Gold on course to its best week in 10 months, as investors sought different havens. And telecoms tycoon Xavier Neil - who's just bought Orange Switzerland for 2.3 billion euros. His new asset is now worth a whole lot more, he says, without him doing anything.

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Europe in shellshock after SNB move

Friday, January 16, 2015 - 02:27