One trader described the central bank's move as "carnage", while Swatch Chief Executive Nick Hayek called the franc's surge in value against the euro an economic "tsunami" for Switzerland, which sells more than 40 percent of its exports to Europe.

Stocks including watchmaker Swatch, luxury goods firm Richemont and cement maker Holcim slumped by between 11 and more than 16 percent as the franc surged against the euro.

Swiss stocks lost some 105 billion Swiss francs of their combined market value or 8.67 percent. The currency moves could, however, have technically led to gains for unhedged dollar investors. http://link.reuters.com/sec83w

Swiss-listed shares in offshore drilling contractor Transocean slumped to an all-time low, while banks Julius Baer and UBS fell more than 11 percent.

"It's carnage," said Central Markets Investment Management's head of trading, Darren Courtney-Cook.

The abrupt ending of the cap, introduced on Sept. 6, 2011 to fight recession and deflationary pressures, sent the Swiss franc soaring by almost 30 percent, threatening Swiss firms' exporting power.

"This will have a violent impact on exporters, especially companies which produce in Switzerland, such as watchmakers. Also the banking sector will suffer, as it gets a big chunk of its revenues from abroad," Geneva-based Bordier & Cie's chief investment officer, Michel Juvet, said.

"A wave of profit warnings will come, and also a wave of cost-cutting and outsourcing efforts. Companies can adapt to gradual moves in currencies, but today's swing is just too brutal and the consequences will be dire."

However, other leading stock indexes in Europe rose, with some traders saying the SNB must be expecting an unstoppable tide of euros from the European Central Bank (ECB) through quantitative easing, which is seen as positive for stocks.

"The actual statement from the SNB talks about monetary policy divergence becoming even more pronounced. Reading between the lines, they expect ECB QE to be announced very shortly," Royal London Asset Management's European fund manager, Neil Wilkinson, said.

The pan-European FTSEurofirst 300 index closed 2.9 percent higher at 1,393.41 points, while Britain's FTSE 100 index, Germany's DAX and France's CAC advanced 1.7 to 2.4 percent.

ADVERSE IMPACT

Mark Haefele, chief investment officer of Swiss bank UBS, said the SNB's decision will harm the Swiss economy, putting the direct effect on Swiss goods exporters at about 5 billion Swiss francs, equivalent to -0.7 percent of Swiss gross domestic product (GDP).

Peter Dixon, equity strategist at Commerzbank, said a significant rise in the domestic currency was the last thing Switzerland needed at a time when its main trading partners were not doing too well on the economic front.

"That's going to make life very much more difficult for Swiss companies. The export-oriented manufacturers are going to take the biggest hit and cyclical stocks like ABB will be in the firing line," Dixon said.

ABB shares fell 9 percent.

A sharp move in stock prices could also affect mergers and acquisitions. However, Holcim said it remained committed to a planned merger with France's Lafarge to create the world's biggest cement maker despite a fall of almost 3 billion francs in the Swiss company's market value.

Swiss drugmaker Roche said it would get some protection from its wide spread of costs and revenues in different currencies.

(Additional reporting by Blaise Robinson, Sudip Kar-Gupta, Alistair Smout and Francesco Canepa; Editing by Louise Ireland)

By Atul Prakash