Monday, 5 August 2024 Reading time : 2 minutes

The selloff in global equity markets intensified on Monday, dragging down the Swiss market. Led by a more than 12% drop in Japan’s Nikkei 225, the SMI shed 2.8% on Monday. The correction also hit US markets, with technology stocks being under particular pressure. The S&P 500 fell 3% by the close of trading on Monday, while the Nasdaq Composite lost 3.4%.

The latest economic data from the US is causing uncertainty in the equity markets. Friday's labour market figures signalled a surprisingly sharp slowdown, fuelling fears that the US economy could slip into recession. Investors are also concerned that the Federal Reserve is acting too slowly after deciding against a rate cut on Wednesday, writes the Financial Times.

The nervousness in the financial markets is reflected in the Vix volatility index, also known as Wall Street's fear gauge. The index measures the expected (implied) volatility of the S&P 500 over a thirty-day period, based on option prices. On Monday, the index shot up to intrady levels of 65 after it settled around 23 on Friday. By the end of trading on Wall Street, the Vix stabilised around 38, well below the record levels of over 80 seen following the outbreak of the coronavirus pandemic in 2020.

In the volatile market environment, products with defensive characteristics are in demand. The following two yield enhancement products on Swiss equities are each equipped with a barrier that can provide a partial cushion against price setbacks.

Last Look BRC: Barrier observation at maturity
6.50% p.a. BRC on Nestle, Novartis, Roche, Zurich Insurance (Valor: 135804497)

The 70% barrier is only observed at maturity. If the prices of all underlyings are above the barrier at maturity – regardless of whether they have touched or fallen below the barrier during the term – the product is fully redeemed. Otherwise, the worst performing underlying is delivered. The coupon is paid out regardless of the scenario.

Low Strike BRC: 90% Strike
8.25% p.a. BRC on Nestle, Novartis, Roche, Zurich Insurance, UBS (Valor: 135804503)

The 60% barrier is monitored throughout the lifetime of the product. If the barrier is not breached during the term, the product is fully redeemed at the nominal amount at maturity. If the barrier is breached and one of the underlyings closes below the strike, the worst performing underlying is delivered. In this scenario, investors receive the underlying at 90% of the initial fixing (low strike) instead of 100%. The coupon is paid out regardless of the scenario.

Indicative terms

 

Disclaimer
This communication is for marketing purposes. It is neither an offer nor an invitation to submit an offer, to purchase or to subscribe to securities and does not constitute investment advice. You should consult your advisors before making an investment decision. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, financial condition, development or performance of the issuer to be materially different from any future results, financial condition, development or performance expressed or implied by such statements. The present document has not been drawn up by the research department as defined in the rules of the “Directives on the Independence of Financial Research” published by the Swiss Bankers Association, hence these rules do not apply to this document. If securities are mentioned in the communication, the base prospectus, the final terms and any key information document may be obtained free of charge from Zürcher Kantonalbank, Bahnhofstrasse 9, 8001 Zurich, VRIS, and from www.zkb.ch/finanzinformationen.

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