Credit Suisse Shares Soar Over 30% After Bank Secures Financial Lifeline

London:

European stock markets recovered slightly on Thursday after troubled banking giant Credit Suisse secured a major financial lifeline and ahead of a key interest rate decision by the European Central Bank.

Frankfurt, London and Paris eked out modest gains, a day after Credit Suisse fell about 3.5 percent on concerns about the health of the two U.S. lenders and the broader banking system.

The euro rose against the dollar ahead of Thursday’s ECB rate decision.

Oil prices edged lower on Wednesday after falling to a 15-month low.

“One minute the market is worried about a banking crisis, the next minute it’s more relaxed,” noted Russ Mold, investment director at stockbroker AJ Bell.

“The next test for markets will be the ECB’s interest rate decision… It looks like it will hike aggressively by 50 basis points given the jitters in the banking system.”

The ECB call is the first by a major central bank since markets were rocked by fears of a banking crisis, testing the eurozone body’s resolve to implement another hefty rate hike.

Investors say the ECB should revise its plans after the collapse of Silicon Valley Bank (SVB) and Signature, the sector’s biggest failure since the 2008 global financial crisis.

There is also considerable debate over whether the US central bank will continue its rate-tightening campaign as the SVB collapse is linked to a sharp rise in borrowing costs over the past year.

Some observers expect the authorities to raise rates again next week but are likely to remain on hold after that, while speculation is growing that it could even announce cuts before the end of the year.

The market meltdown has forced Credit Suisse to tap a financial lifeline from the Swiss central bank.

After seeing its stock in freefall on Wednesday, Switzerland’s second-biggest bank, which is already struggling with a number of scandals, tried to avert the latest crisis by announcing that it would replace the country’s central bank. will borrow up to $53.7 billion from

Its shares rose more than 30 percent at the open Thursday.

“Fear has once again gripped the markets,” said Craig Erlam, senior analyst at OANDA Trading Group, which is concerned about a repeat of past crises…and the implications for the financial system and the global economy. “

“Of course, that’s natural when so little is known about the situation and what it ultimately means for the health of the rest of the system.”

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