After UBS purchased Credit Suisse bank, European stock markets closed bigger on Tuesday as investors were at rest. European stocks ended slightly higher on Wednesday after UK inflation unexpectedly rose as investors worldwide awaited the Federal Reserve’s latest interest rate decision.
European stock market analysis
- The pan-European Stoxx 600 index increased by 1.3%, while some sectors closed in the green.
- Financial services rose by 4.4%, while the banking sector increased by 3.8%.
- Insurance stock also increased by 2.9%.
- On Monday, there was a fluctuation in the European markets and a decrease in the Stoxx 600 in the first trading hour before going into positive territory.
On Sunday, UBS agreed to purchase rival Credit Suisse for $3.2 billion (3 billion Swiss francs) in an urgent rescue deal. According to UBS, both banks will have $ 5 trillion of invested assets. UBS ascended from a loss to a 3.8% gain, while the share of Credit Suisse increased by 54%.
Credit Suisse shares were uncertain on Tuesday, closing up 7% in the afternoon. UBS increased by 12%.
European banks are expected to remain jittery despite the increased confidence, Emma Wall, head of investment research and analysis at Hargreaves Lansdown, said through email.
Wall added, “Last week’s ECB indicators are pointing to more rate hikes, a delicate balance to keep the eurozone from sliding into recession. The banking sector is the most sensitive to economic stability so growth rates will be crucial”.
ECB eases interest rates
The European Central bank elevated interest rates by 50 basis points last week. On Monday, ECB president Christine Lagarde said that while the recent turmoil in the financial sector could help bring down inflation, the rate increase will remain its main tool to bring prices down.
The gain on two-year German government bonds was increased to 2.56% on Tuesday afternoon. Reuters data shows it is on board for the huge daily increase since September 2008.
Markets are fastening for a two-day Federal Reserve policy meeting on Tuesday. Traders anticipate a quarter-point rate hike with an 85% probability, as CME Group’s FedWatch tool indicates.
US stocks rose after US Treasury Secretary Janet Yellen said on Tuesday morning that the government was ready to offer new deposit insurance to troubled banks.