Europe: Shares jump as Credit Suisse bailout offsets ECB rate hike
EUROPEAN shares jumped on Thursday as a lifeline from the Swiss National Bank to Credit Suisse helped ease fears of a global banking crisis, offsetting concerns around the European Central Bank’s big 50-basis point interest rate hike.
The Stoxx 600 closed the day 1.3 per cent higher after dropping 0.6 per cent and touching a fresh 10-week low following the rate hike decision.
The index has lost 2.6 per cent so far this week as bank stocks bled in the aftermath of U.S. lender Silicon Valley Bank’s collapse last week.
The banks sector index also gained 1.2 per cent, bouncing back from an intraday 1 per cent drop following the rate hike, while the index for euro zone banks rose 1.4 per cent.
In a much-needed boost to the banking sector, which has lost 9 per cent so far this week, Credit Suisse secured a lifeline from the Swiss central bank to shore up investor confidence.
Shares in the Zurich-based lender jumped 19.2 per cent on Thursday after tumbling 24 per cent to a fresh record low in the previous session.
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“There appears to be a lifeline for the beleaguered lender, which should prevent another Lehman moment, much to the relief of markets and Credit Suisse’s investors,” said Victoria Scholar, head of investment at interactive investor.
Lender-heavy indexes of Spain and Italy also advanced more than 1 per cent each.
The ECB raised its three policy rates by 50 basis points to 3.50 per cent in its sixth consecutive rate hike, while dropping its forward guidance that was perceived as a positive by the market.
“Compared to the message that the ECB had given earlier - hike, hike, hike – the abandoning of forward guidance is implicitly a way of easing, and it’s the right response,” said Andrea Cicione, head of research at TS Lombard.
Further, the central bank cut its inflation projections and lifted its growth projection for this year after the bloc avoided a winter recession.
The technology sector index jumped 2.9 per cent, its strongest one-day gain in more than a month, tracking US peers.
Among other major movers, Glencore rose nearly 3 per cent on reports that the miner will not renew a US$16-billion deal to buy aluminium from Russia’s largest producer.
Pest control company Rentokil Initial jumped 10.1 per cent after lifting its medium-term revenue and cost saving forecasts.
British lender OSB Group marched 9.4 per cent up after reporting higher full-year profit.
On the other hand, Aroundtown lost 10.2 per cent and dropped to the bottom of the Stoxx 600 after peer Grand City Properties suspended its dividend payout and slid 6.8 per cent. REUTERS
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