Credit Suisse announced that it would borrow up to $53.7 billion from the Swiss Central Bank. (file)
London:
European stock markets recovered slightly on Thursday ahead of troubled banking giant Credit Suisse securing a major financial lifeline and a key interest rate decision by the European Central Bank.
Frankfurt, London and Paris pared modest gains a day after falling about 3.5 percent on fears about the health of Credit Suisse and the broader banking system following the collapse of the two US lenders.
The euro advanced against the dollar ahead of the ECB’s rate decision on Thursday.
Oil prices eased slightly after falling to their lowest level in 15 months on Wednesday.
“One minute the market is worried about a banking crisis, the next minute it’s more relaxed,” said Ross Mould, investment director at stockbroker AJ Bell.
“The next test for markets will be the ECB’s interest rate decision … It seems unthinkable that it would go for an aggressive 50-basis point hike given the panic around the banking system.”
The ECB call is the first by a major central bank as markets were rocked by fears of a banking crisis, testing the eurozone institution’s resolve to enact another massive rate hike.
Investors say the ECB should reconsider its plans after the collapses of Silicon Valley Bank (SVB) and Signature, the sector’s biggest failure since the 2008 global financial crisis.
There is also much debate over whether the US central bank will continue with its rate tightening campaign as the collapse of the SVB has been widely linked to a sharp rise in borrowing costs over the past year.
Some commentators expect officials to raise rates once more next week but probably hold off until later, while there is a growing belief that it could even announce a cut before the end of the year.
The market debacle has forced Credit Suisse to tap into a financial lifeline from the Swiss central bank.
After seeing its shares tumble on Wednesday, Switzerland’s second-largest bank, already grappling with a number of scandals, sought to stave off the latest crisis by announcing it would borrow up to $53.7 billion from the country’s central bank. Did.
Its shares soared more than 30 percent at the open Thursday.
“Fear has once again gripped markets, with concerns about a repeat of past crises … and the implications for the financial system and the global economy,” said Craig Erlam, senior analyst at OANDA Trading Group.
“Of course, this is natural when so little is known about the condition and what it means for the health of the rest of the system.”
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