Europe open: Shares rally after Credit Suisse turmoil as eyes turn to Fed, BoE

European shares rebounded from the turmoil of recent days after the rescue of Credit Suisse with investors now focused on how the US and UK central banks will respond with interest rate decisions this week.

The Stoxx 600 index was up 0.8% at 0800 GMT with all major bourses higher. UBS shares were up in response to its $3.2bn takeover of its famous Swiss rival.

“With the Federal Reserve rate meeting due to start later today, markets have become increasingly divided as to what the FOMC may well do when it comes to interest rates tomorrow, with opinions split between another 25bps hike, a pause, and a 25bps rate cut,” said CMC Markets analyst Michael Hewson.

“Assuming recent gains hold, and we get no further surprises then the odds still favour a 25bps rate rise, otherwise, the Fed runs the risk that it sends the message it is more concerned about financial stability than it is about its fight against inflation. A rate cut would send an even worse message that the Fed sees something the market doesn’t and could spook already jittery markets even further.”

In economic news, UK government borrowing hit a record high for February due to the energy support scheme, according to figures released on Tuesday by the Office for National Statistics.

Public sector net borrowing came in at £16.7bn, up from £7.1bn in February 2022 and above consensus expectations of £11.4bn. It marked the highest level for the month of February since records began in 1993.

However, the data also showed that debt interest payments fell by £1.3bn on the year to £6.9bn.

In other equity news, shares in UK and French retailer Kingfisher rose despite a fall in annual revenue and profits.

Thyssenkrupp was up after the German Handelsblatt newspaper reported that CVC was considering buying its steel unit.

Pearson gained after agreeing to sell its online learning unit to private equity group Regent.

Reporting by Frank Prenesti for Sharecast.com