Switzerland calls the EC’s bluff

Given the parallels with Brexit, the recent escalation in the spat between the EU and Switzerland has filled many column inches over the past month. (To re-cap, after the Swiss government refused to sign off on the proposed new treaty, the EC followed through on its threat to allow the stock market ‘equivalence’ regime to expire at the end of June, and Switzerland responded by banning trading in shares of Swiss companies in EU trading venues.) As far as the impact on financial markets is concerned, though, it has been a bit of a non-event. The Swiss Market Index (SMI) has broadly performed in line with the DAX since equivalence expired (see Chart 1), while trading volumes on the SMI in the first week of post-equivalence trading were about 2.5% higher than their five-year average. The Swiss franc has also shrugged off the dispute and remains close to a two-year high against the euro. So while the row will probably rumble on later this year, it is unlikely to prevent the franc from rising further into 2020.